Chapter 4 Flashcards
Nirvana Publishing House invested in high-end printing equipment. After a year of production, the company had to double the amount of production of its newspapers and weekly magazine because of high customer demand. However, the company did not have to invest in another similar equipment to meet demands. This is an example of a _____.
a) fixed cost of demand
b) fixed cost of supply
c) fixed cost of scale
d) fixed cost of production
d) fixed cost of production
Which of the following statements is true of a company’s general and administrative costs (G&A)?
a) They help a company with high sales volume that creates cost advantage by managing its G&A across more units.
b) They exclude the expenses of operating a company.
c) They are part of a company’s production costs.
d) They include Research and Development (R&D) expenses.
a) They help a company with high sales volume that creates cost advantage by managing its G&A across more units.
Which of the following is a feature of task specialization?
a) It enables workers to be more efficient and thus enables them to avoid loss of time.
b) It results in job dissatisfaction because employees must repeat the same functions over time.
c) It enables employees to choose tasks that they are most capable of performing.
d) It causes workers to be confused about the task at hand.
a) It enables workers to be more efficient and thus enables them to avoid loss of time.
Blaze Corp., a car company, shared its costs of producing cars. It did so by introducing the production of car accessories that are used by customers to upgrade or customize their cars. Blaze Corp. started selling car accessories such as engine oils, wheels, and music player and thus shared its market research costs between cars and car accessories. This led to a definite decrease in the overall cost of production. This scenario best illustrates _____.
a) economies of wealth
b) economies of scale
c) economies of scope
d) economies of finance
c) economies of scope
A group of students studying a firm named Sanders & Collins Corp. found that the workers initially learned their task-related activities very fast. In turn, this helped the firm reduce the labor cost incurred in producing each product. However, their rate of learning these tasks reduced over time. This scenario best illustrates the _____.
a) learning curve
b) experience curve
c) value curve
d) scale curve
a) learning curve
The board of directors of Colors Corp., a new startup, chalked out a list of resources that would be needed to optimize the efficiency of the company. It needed a human resources department to take care of recruitment, a few suppliers to provide raw materials, a few data recording equipment such as computers to store and manage data, and a large geographical area to start the company. The board stated that these provisions would help the company obtain desired profits. The resources and provisions mentioned in this scenario are examples of _____.
a) inputs
b) outcomes
c) incomes
d) outputs
a) inputs
Lavender Inc., a computer manufacturing company, sells its products at lower prices than its competitors in order to gain market share and subsequently increase their profitability. The scenario best illustrates the _____.
a) pricing strategy
b) investment strategy
c) acquisition strategy
d) cost-management strategy
a) pricing strategy
String Line Inc. has established a loyal supplier base. The management at String Line had created a system in which it chooses a supplier that is reasonably affordable, and instead of quoting the company’s price and demanding that it be met, it complies with the supplier’s quotes. Over time, this has established a bond of loyalty with the supplier. When String Line opened a new branch, the supplier built its plant close to the branch to save transportation costs. Which of the following has String Line Inc. established with the supplier?
a) Access
b) Rivalry
c) Cooperation
d) Competition
c) Cooperation
Which of the following statement is true of the learning curve?
a) It is the concept that labor costs per unit decrease with increases in volume due to learning.
b) It is simpler to calculate than a scale curve.
c) It is a graphic representation of the relationship between cost per unit and scale of production.
d) It is a tool that managers use to determine the emotional quotient of an employee.
a) It is the concept that labor costs per unit decrease with increases in volume due to learning.
TrueBiz Corp. follows a system wherein all the activities of the company are directed toward converting parts of a product into an entire finished good. These activities are done in tandem so that a perfected product can be created which can be sold to a prospective customer. This is an example of a _____.
a) value chain
b) product line
c) pricing chain
d) supplier chain
a) value chain
What is meant by diseconomies of scale?
a) An increase in marginal cost when output is increased
b) The smallest level of output (unit volume) that a plant or firm can produce to minimize its long-run average costs
c) A reduction in costs per unit due to increases in efficiency of production
d) A decrease in the average total cost of production because of an increase in the number of different goods produced
a) An increase in marginal cost when output is increased
In the context of the experience curve, what did early work by the Boston Consulting Group show?
a) The slope of an experience curve is described by the reduction in costs.
b) Scale curves and experience curves tend to be steeper in service industries when compared to manufacturing industries.
c) Learning and experience curve slopes tend to be steeper in the later stages of production.
d) A company’s relative market share was a key indicator of competitive advantage and profit performance.
d) A company’s relative market share was a key indicator of competitive advantage and profit performance.
Identify a primary way in which companies achieve cost advantage through lower-cost inputs.
a) By blocking access to inputs for other companies
b) By allowing suppliers to exercise strong bargaining power
c) By cooperating especially well with suppliers
d) By getting inputs from far-off locations
c) By cooperating especially well with suppliers
Information that is not public and that is viewed as the property of the holder is called ________.
Proprietary Knowledge
Which of the following statements is true of cost advantage?
a) Firms with high production volumes are sure to gain a cost advantage.
b) Large firms are guaranteed to secure a wide cost advantage.
c) Size and scale do not always guarantee a cost advantage.
d) Firms which produce standardized products have a cost advantage.
c) Size and scale do not always guarantee a cost advantage.
