Section 2 B

Question 1

A ____seeks to create a competitive advantage by developing a product that has unique attributes that are not offered by the competition.

In order for a differentiation strategy to be successful, it must be tied to something that cannot be easily copied T/F

A variation on the differentiation strategy is for a firm to make a product that requires replacement parts that are slightly different than standard parts available made by other companies. T/F

Answer 1

differentiation strategy

True

True

Question 2

DIFFERENTIATION STRATEGIES (3)
\_\_\_ various activities can provide a strategic advantage, providing the \_\_\_activity can be performed better or more cost effectively by an outside firm.

____has allowed many organizations to reach new markets in an efficient and effective manner; however, it has also allowed easier entry into a firm’s current markets by new competitors.

Answer 2

Outsourcing

E-commerce technology

Question 3

Differentiation strategies can be successful when:

most buyers have similar requirements for the product attributes.
the differentiating product attribute cannot be easily copied.
buyers are particularly price-conscious and competition is strong.
buyers are easily convinced to switch products through aggressive advertising and the costs for product switching are low.

Answer 3

the differentiating product attribute cannot be easily copied.

Question 4

The consensus of economic forecasts indicates that consumer prices are likely to increase because of increases in aggregate demand. Which of the following outcomes is most likely to occur as prices increase?

Quantity of output increases if there is capacity to produce.
Unemployment increases.
Profits fall if all costs are fixed.
Profits rise even if costs increase.

Answer 4

Quantity of output increases if there is capacity to produce.

If there is an increase in demand, both equilibrium price and equilibrium quantity will increase, provided that there is excess capacity to meet the increased demand

Question 5

Market Equilibrium

The intersection point of the demand curve and supply curve represents the \_\_\_. No shortage or Surplus.

The market equilibrium occurs where quantity supplied equals quantity demanded T/F.

. In the event there is a ___, that is, a price above the equilibrium price, then the quantity supplied is __than quantity demanded and there would be a __of the product at that price ceiling.

Answer 5

market equilibrium price.

True

price floor, greater, surplus

Question 6

hich of the following is not an example of price discrimination?

A department store charges $10 for an item while the same good sells for $7.75 at a discount store.
An airline charges $175 for 14-day advance purchase ticket round trip between New York and Chicago and charges $400 for a ticket on the same route, purchased two days before the flight.
A restaurant gives seniors a 15% discount if the order their food before 5:30 p.m.
A grocery store provides discount coupons to everyone.

Answer 6

A department store charges $10 for an item while the same good sells for $7.75 at a discount store.

Question 7

_____is the practice of selling a product or service at different prices to different consumers when those price differences are not justified by cost differences.

Answer 7

Price discrimination

Question 8

PRICE DISCRIMNIATION is possible when:

Firm has __ over output and price
Buyers can be ___ into distinct classes that have different abilities to pay for the product
Purchasers would NOT be able to resell to purchasers from the higher priced market T/F

The logic of price discrimination is to attempt to segment the market, change the price consumers would be willing to pay, and recapture a portion of the consumer surplus. T/F

Answer 8

Control
segregated
True

True

Question 9

BENEFITS OF GLOBALIZATION

\_\_\_\_ (FDI) brings the best technology and other forms of intellectual capital to countries that would otherwise have to make do without it

Benefits of FDI:

Create Jobs
Stable Wages
Increase Imports
Stable manufacturing and services
bring new research/tech/skills T/F

Answer 9

Foreign direct investment

True
False - Increase Wage
False - Increase Exports
False - Strengthen manufacturing & Services
True

Question 10

GLOBALIZATION - FOREIGN DIRECT INVESTMENT

FDI brings products that would otherwise be ____to the countries where the investment occurs, which presumably increases the quality of output and therefore increases the value of world output.

Answer 10

unavailable

Question 11

GLOBALIZATION
The ___has made it very difficult for governments to control cross-border capital movements

IT has allowed for the creation of just-in-time __. This includes:
Products made ___
Emerging networks form new opportunities for ___

____has led to a competitive advantage for emerging economies
___ now exists which makes it easier to shift production to take advantage of low-cost labor

Answer 11

IT revolution

supply chains.
Everywhere
Strategic alliances

Labor inflexibility (immobility) 
Labor arbitrage

Question 12

Globalization is a process by which nations of the world become integrated through global networks of communication. Its current success is tied to a number of socioeconomic effects, with one of the key effects being:

an understanding that the success of the emerging economies is more than simply the cost advantage they have due to having relatively low-cost labor.

the relatively large labor force in emerging markets and declining birth rates that have historically been associated with dynamic positive economic change.

an undervalued currency in emerging economies that would stimulate exports and strong investment in infrastructure.

the fact that innovation blowbacks as the low-priced, high-quality products developed for the emerging economics now will be effectively marketed and sold in the developed world.

Answer 12

the relatively large labor force in emerging markets and declining birth rates that have historically been associated with dynamic positive economic change.

Question 13

PROBLEMS W/ GLOBALIZATION

Executives should not assume that the prevailing reality of globalization will continue. T/F
…………… __opportunities that allow short-term wage savings will shift geographically over time.
………….. With globalization creating a higher probability of financial shocks, managers will need to become more adept at ___.

____causes a firm to shift focus from strategic planning to the analysis of potential future events and related outcomes.

The rebalancing that gives \_\_to emerging economies will require a significant shift in strategic focus. Emerging markets become the locus of growth in consumption, production, and most of all innovation.

Answer 13

True - if you assume, its always bad
……Labor arbitrage
……….risk management

Scenario planning

more power

Question 14

PROBLEMS W/ GLOBALIZATION -SCENARIO PLAN
When dealing with potential scenarios involving globalization, firms might do scenario planning for situations such as the following:

Rapid shifts in ___
Accepting that emerging economies are now becoming “___” in consumption as well as their current position as “drivers in production”

Answer 14

currency prices

drivers

Question 15

PROBLEM W/ GLOBALIZATION - BLOWBACKS

There will be “\_\_\_” as low-priced, high-quality products created for the mass market of emerging countries will be effectively marketed and sold in the developed world. 

___ is the idea that countries from developed markets that attempt to sell in emerging markets may in fact find themselves under attack in their home markets by companies who are more aggressive in realizing the potential for innovation in emerging markets

Answer 15

innovation blowbacks to both

Question 16

RANDOM
____ (accounting costs) are all the cash expenditures that companies make to support production that is owned by others

_____is the result of removing or lessening barriers to international trade, which will cause jobs to move to nations where labor costs and the cost of doing business due to factors such as labor laws and environmental regulations are least expensive

Answer 16

Explicit costs

Global labor arbitrage

Question 17

ELASTICITY OF DEMAND

The _____is a measure of the responsiveness of consumers to a change in a product’s price.

Demand is ___if it does not respond much to price changes, and ___if demand changes a lot when the price changes

A shift in the supply curve to the ___indicates that a larger quantity of the product is supplied at each price

hings that shift the supply curve are technology, prices of resources, expectation of future prices, number of sellers, taxes and other government restriction or subsidies. T/F

Answer 17

price elasticity of demand

inelastic , elastic

right

True

Question 18

Companies will use strategic alliances to:

open up or improve access to __,
learn from other companies by sharing __and various types of __,
improve supply chain __,
get into critical countries in an effective and efficient manner T/F
gain access to necessary resources. T/F

Answer 18

new markets
technology , expertise
efficiency
T
T

Question 19

If the price for a product increases and the demand curve for a second product shifts to the left, then:

the products are substitutes.
the products are complementary goods.
the first product is an inferior good.
the products are neutral goods.

Answer 19

the products are complementary goods.

Two goods that are used jointly as they are consumed are complementary goods. If the price of one increases causing a decrease in the quantity demanded of that product, then the demand for the other product will fall causing a shift in the demand curve.

Question 20

SUPPLY AND DEMAND TOPICS

___goods are goods and services that are used in conjunction with each other.

___are goods or services whose demand decreases as a consumer’s income increases, assuming prices remain constant.

___goods are good or services whose demand increases as consumer’s income increases,

__goods are goods and services that can be used in place of each other in at least some of their uses

_____is a proposition that describes how an individual’s satisfaction (or marginal utility) derived from the consumption of each additional unit of the good or service declines as consumption of that good or service increases. Example: Each lick on the lollipop tastes less like the first.

Answer 20

Complementary

Inferior goods

Normal

Substitute

Law of diminishing marginal utility

Question 21

come and employment tend toward an equilibrium level where:

inventory accumulation takes place.
inventory depletion takes place.
aggregate supply equals aggregate demand and intended savings equals intended consumption.
aggregate supply equals aggregate demand and intended savings equals intended invest

Answer 21

aggregate supply equals aggregate demand and intended savings equals intended investment.

Question 22

Which of the following is correct in stating a similarity between firms in a perfectly competitive industry and a monopolistically competitive industry?

Firms in either industry structure produce standardized products.
Firms operating in either industry structure engage in non-price competition.
There are no significant barriers to entry in either market structure.
Firms in either market structure face a perfectly elastic demand curve.

Answer 22

There are no significant barriers to entry in either market structure.

Question 23

PERFECT COMPETITION
The market structure of __is characterized by a large number of sellers producing a standardized product with easy entry and exit into and out of the industry. Seller can NOT influence ___

Assumptions w/ Perfect Competition
1. Many small independent buyers and sellers who produce ___
2. Each firm produces such a small portion of total output that they have no influence __
3. There is free entry into and exit from the industry. There are no significant legal, technological, or financial barriers to entry. T/F
4, Firms face a ____demand curve at the market price that is determined where consumer demand equals industry supply.
5. If the firm is making an economic profit, there is an incentive for ___

Answer 23

perfect competition , product price

homogeneous products
over price.
True
perfectly elastic demand curve 
new firms to enter the market.

Question 24

PERFECT COMPETITION
The market equilibrium occurs where price equals marginal cost at the minimum point on the average cost curve. This means that in equilibrium, a firm is operating at its most efficient level of output. Marginal revenue equals marginal cost as minimum average cost. At this point, the firm is making only a __

Profit maximizing rule (MR = MC) T/F

Answer 24

normal profit.

True

Question 25

MONOPOLISTIC COMPETITION

The market structure for monopolistic competition is characterized by having many small firms that produce differentiated products. The firm has some degree of control over product price. T/F

Assumptions w/ MONOPOLOSTIC COMPETITION

1. Large # of independent buyers and sellers
2. Free entry and exit into industry
3. Firms are producing ___ products

What type of demand curve?
Goal of advertisnig is to shift demand curve to the right and make demand less elastic - T/F
Entry will continue until __profit disappears.

Answer 25

True

true
true
differentiated

Downward sloping
True
economic

Question 26

A profit-maximizing firm operating in a competitive market in the short run will increase output:

until marginal cost begins to rise.
until total revenue equals total costs
as long as marginal revenue is greater than marginal costs.
as long as marginal costs are greater than marginal revenue.

Answer 26

as long as marginal revenue is greater than marginal costs.

In pure competition, a firm will continue to produce until marginal costs = marginal revenue; therefore, as long as marginal revenue is greater than marginal costs, the firm will continue to increase output

Question 27

All other things being equal, movement along a supply curve occurs if:

the number of sellers increases or decreases.
the price of resources needed in the production of the product is expected to increase.
technology in the production of the product improves.
the price for the product increases or decreases.

Answer 27

the price for the product increases or decreases.

Question 28

A best-cost producer can gain a competitive advantage:

by delivering a superior product at a lower price than the competition.
when buyers are more concerned about price than value.
when they can do a better job of controlling cost driver activities.
when they can concentrate on low-cost alternatives that provide product differentiation.

Answer 28

by delivering a superior product at a lower price than the competition.

The best cost provider attempts to provide a product with superior quality, features, durability, service, etc. at the lowest cost. In other words, they are trying to give the buyer more value for their money.

Question 29

The ____attempts to provide a product with superior quality, features, durability, service, etc. at a low price. In other words, the strategy is to give consumers more value for their money.

The firm that successfully competes using the best-cost provider strategy needs to be able to incorporate upscale product attributes while still aggressively controlling costs. T/F

Answer 29

best-cost provider

True

Question 30

Which of the following would not be a successful business strategy resulting from rebalancing due to the shifting balance of power in the international economy?
Promoting the same standards of quality throughout the world while maintaining the flexibility to tailor product attributes to the customs and traditions of local markets

Enhancing the use of R&D, integrating innovation, and devising new products at lower costs while developing a long-term customer focus

Attempting to identify clusters of similar customers across a broad base of international markets to allow building revenue and/or profit streams that would support ongoing capital investment

Engaging in specialized production for a significant number of local markets by constructing manufacturing facilities in several locations to ensure that products produced would meet local tastes and preferences

Answer 30

Engaging in specialized production for a significant number of local markets by constructing manufacturing facilities in several locations to ensure that products produced would meet local tastes and preferences

The high cost of information technology infrastructure and the need for highly skilled labor in the production process using many of the new technologies requires a market niche that caters to a large global market that requires the firm have the ability to provide mass customization and increased sensitivity to cultural diversity.

Question 31

BIZ STRATEGY

There are several approaches to success as the rebalancing in the world economy moves forward, with two major approaches

Identifying ____across multiple domestic and/or international markets that would allow for building revenue and profit streams to continue

Building operations of an adequate scale in specific regions and territories by teaming up with very knowledgeable on-the-ground partners for product development. T/F

Global entrepreneurs must become catalysts of change and enhance the use of __and integrate innovation to develop new products,

Process innovation and the transfer of technology are increasingly becoming key to \_\_

promoting the same standards of quality throughout the world on a consistent basis while at the same time incorporating the flexibility to tailor packaging or the image of the product to suit the customs and traditions of the local market. T/F

Answer 31

clusters of similar customers

True

R&D

global success.

Tru

Question 32

The demand curve for a product reflects which of the following?

The impact of prices on the amount of product offered
The willingness of producers to offer a product at alternative prices
The impact that price has on the amount of a product purchased
The impact that price has on the purchase amount of two related products

Answer 32

The impact that price has on the amount of a product purchased

Demand is the quantity of goods or services that buyers will purchase at various prices. A demand curve is a graphical representation of related price and quantity demanded, so the demand curve represents the impact that price has on the quantity of the good purchased.

Question 33

In relation to the balance of trade, all international transactions involving the purchase or sale of physical products between domestic and foreign countries are reflected in:

the balance of the capital account.
the official financing account.
the trade balance in the current account.
the capital account surplus.

Answer 33

the trade balance in the current account.

The balance of trade is the difference between the export (sale) and import (purchase) of merchandise (physical products) by a country. These transactions are reflected in the trade balance in the current account.

Question 34

In which of the following situations would there be inelastic demand?

A 5% price increase results in a 3% decrease in the quantity demanded
A 4% price increase results in a 6% decrease in the quantity demanded
A 4% price increase results in a 4% decrease in the quantity demanded
A 3% price decrease results in a 5% increase in the quantity demanded

Answer 34

A 5% price increase results in a 3% decrease in the quantity demanded

The price elasticity of demand is the absolute value of the percentage change in quantity demanded divided by the percentage change in price. If the elasticity is less than 1.0, the elasticity is inelastic. Since a 3% decrease in quantity demanded results from a 5% price increase, the elasticity of demand is:

0.3 ÷ 0.5 = 0.6
This is a number less than 1.0, indicating inelastic demand.

Demand/Price

Question 35

Falser Co. increases all of its input factors by 100%, resulting in increased output of 90%. Which of the following statements identifies the effect of this change?

Marginal returns rise.
Marginal costs decrease.
Returns to scale increase.
Returns to scale decrease.

Answer 35

Returns to scale decrease.

The law of diminishing returns (also called the principle of diminishing marginal productivity) is an economic law stating that a point will eventually be reached in production at which additions of an input will yield progressively smaller, or diminishing, increases in output.

Question 36

SOURCES OF SOVERIGN WEALTH FUND

The primary sources of funds come from earnings from ___(primarily energy), from exports,

A key determinant of the export earnings is generally a ___that makes a country’s goods and services lower priced in terms of the foreign currency.

PROBLEM
Central Banks in emerging economies often do not have the policy tools necessary to absorb or sterilize all the domestic currency created to support the trade surplus. T/F

___are government investments funded by foreign currency reserves but managed separately from official currency reserves and invested for profit.

Answer 36

commodity-based investments

weak currency

True - They cant keep up

Sovereign wealth funds

Question 37

Company A and Company B are subsidiaries of Company C, a multinational company. A has a fixed corporate tax rate of 15% and B pays a 25% fixed corporate tax rate. A sells a component to B at a price ranging from $100 to $200 per unit. Which of the following statements is correct regarding the transfer price from A to B?

A transfer price of $100 will maximize after-tax profits of B and C.
A transfer price of $100 will maximize after-tax profits of A and C.
A transfer price of $200 will maximize after-tax profits of B and C.
A transfer price of $200 will maximize after-tax profits of A and C.

Answer 37

A transfer price of $200 will maximize after-tax profits of A and C.

A transfer price of $200 will have an after-tax revenue of $170 [$200 × (1 − .15)] for Company A and an after-tax expense of $150 [$200 × (1 − .25)] for Company B, for a net after-tax profit of $20.

A transfer price of $100 will have an after-tax revenue of $85 [$100 × (1 − .15)] for Company A and an after-tax expense of $75 [$100 × (1 − .25)] for Company B, for a net after-tax profit of $10.

Hence, A transfer price of $200 will maximize after-tax profits of A and C.

Question 38

__is the internal price charged by a selling department, division, or subsidiary of a company for a raw material, component, finished good, or service to a buying department, division, or subsidiary of the same company.

Answer 38

Transfer price

Question 39

A country’s currency conversion value has recently changed from 1.5 to the U.S. dollar to 1.7 to the U.S. dollar. Which of the following statements about the country is correct?

Its exports are less expensive for the United States.
Its currency has appreciated.
Its imports of U.S. goods are more affordable.
Its purchases of the U.S. dollar will cost less.

Answer 39

Its exports are less expensive for the United States.

Bought something for $10 @ 1.5. Now its worth 1.7. I now have a gain, so when i can import it, it’ll cost me less.

Question 40

In the short-run, average variable cost for a firm is rising; therefore:

average variable cost is below average fixed cost.
average fixed cost is constant.
average total cost is at a minimum.
marginal cost is above average variable cost.

Answer 40

marginal cost is above average variable cost.

The average-marginal rule states that when the marginal magnitude is above the average magnitude, the average magnitude rises; therefore, since average variable cost is rising, marginal cost must be higher than average variable cost.

Question 41

Emerging market economies tend to have the following: T/F

(1) High debt-to-GDP ratios
(2) Low currency reserves and rising trade surpluses
(3) Low-cost labor
(4) Lowsavings rates
(5) No Investments in infrastructure

Answer 41

False - Low debt to GDP ratio
False - Large currency reserve
True
False - High savings Rates
False - They DO have investments in infrastructure

Question 42

EXCHANGE RATE SYSTEM

\_\_\_\_are determined by the interaction of supply and demand for the various foreign currencies in foreign exchange markets.

Exchange rate determinants include: Changes in \_\_\_ tastes Relative \_\_\_ changes Relative \_\_\_ rates. 

Disadvantages of flexible exchange rate systems include:

1. Flexible exchange rate produces ___ in the future price of the foreign currency
2. if currency strengthens, it will need to export ___ goods

Answer 42

Exchange rates

Consumer
Income
Interest

uncertainty
fewer

Question 43

The following transactions were noted for an economy whose currency is denominated in pesetas (Pta).

                                       Amount in Pesetas    Imports of goods                              20,300    Exports of goods                              15,760    Domestic purchases of assets in foreign
 countries                                           6,300    Foreign purchases of assets          1,400    Net investment income                     (3,700)    Gifts recv'd from abroad (net transfers)     1,240

When calculating the current account balance for this economy:

Answer 43

deficit of 7000

The balance of trade is calculated by subtracting merchandise imports from merchandise exports (15,760 Ptas. - 20,300 Ptas.) which shows a balance of trade deficit of 4,540 Ptas. The negative net investment income (3,700 Ptas.) is added to this balance, and it would be reduced by the positive inflow of transfers (1,240 Ptas.) leaving a current account deficit balance of 7,000 Ptas.

The two accounts dealing with the purchase of assets are part of the capital account and therefore are not relevant for this calculation. If there were any exports or imports or services, they would have been included in the calculation.

Question 44

A change in supply is caused by a change in one of the supply determinants other than the price of the good. Examples of supply determinants are:

1. the price of the resources needed to produce the product.
2. technology.
3. taxes and subsidies.
4. prices of other goods.
5. future price expectations.
6. the number of sellers in the market.

Answer 44

HYEP

Question 45

Short Run Vs Long Run Cost of Production

___is a time period so ___that at least one input is fixed. It is usually assumed that plant and equipment is the fixed factor.

___run is a time period where all inputs are variable. Also known as the “___” where the entrepreneur or the firm makes decisions such as whether to enter or exit an industry,and other decisions.

Once the firm has made the decision concerning plant capacity, they are then “operating in the __ run.”

Answer 45

Short run , short

Long, Planning Period

short

Question 46

CAUSE FOR TODAY’S GLOBALIZATION
A cause for today’s globalization is the increase in state-sponsored enterprise

The main effects of rapid technological change included the following:

1. Disaggregation of ___
2. Distributing ___ production methods
3. Migration of ___ production
4. Immigration of highly educated and skilled labor to countries w/ advanced IT. T/F

___ systems combine the low costs of mass production processes with the flexibility to meet the tastes and preferences of ever smaller groups,

The underlying strength of many emerging economies is based on an undervalued __

Answer 46

False -it is the privatization of state enterprise

1. production
2. lean
3. labor-intensive, costly
4. True

Mass customization

currency,

Question 47

Variable rate loans reduce the potential interest rate risk of:

borrowers.
lenders.

The ____rate is the stated rate on a loan or a deposi

Answer 47

Both

nominal interest

Question 48

Supply Chain Sustainability
In addition to traditional supply chain functions, sustainability incorporates issues such as:

1. environmental impact,
2. social responsibility,
3. economic stability,
4. health and safety, and
5. stakeholder interests.

____now is also incorporated into supply chain management to deal with considerations.

Answer 48

Memorize

Risk management

Question 49

KEY OBJECTIVES OF SUPPLY CHAIN

1. Improve ___at all levels
2. Reduce ___ levels while improving customer service
3. Reduce __base while developing supplier relations
4. Coordinate logistical activities T/F
5. Arrange credit terms and methodologies of exchanging funds across entities within supply chains…T/F

Answer 49

Communications 
Inventory
supplier 
True
True

Question 50

Which of the following formulas should be used to calculate the economic rate of return on common stock?

(Dividends + Change in price) ÷ Beginning price
(Net income - Preferred dividend) ÷ Common shares outstanding
Market price per share ÷ Earnings per share
Dividends per share ÷ Market price per share

Answer 50

(Dividends + Change in price) ÷ Beginning price

he economic rate of return is a percentage measure of the total return received by the investor. This is determined by the following formula:

[Dividends received + (Ending price - Beginning price)] ÷ Beginning price
Note: The term in parentheses represents the change in price that is used in the question.

Question 51

NICHE STRATEGY

A \_\_\_\_can either focus on low cost or differentiation in a particular market niche by doing something different than competitors.

The niche strategy can work best if:

1. Large enough to be ___
2. Mkt leaders have little interest in the ___
3. Few competitors are focusing on the ___
4. Firm supplying the niche has developed facilities and resources T/F

Answer 51

niche strategy

profitable
Niche
Niche
True

Question 52

Determinants of elasticity of demand

The \_\_\_the number of substitutes generally available for the product, the greater its price elasticity of demand.

Generally speaking, the more the consumer considers the good to be a “___” rather than a “necessity,” the greater the price elasticity of demand.

Generally, the longer consumers have to respond to a price change, the less elastic the demand would be. t/F

Answer 52

larger

luxury

false - the more elastic

Question 53

How does inflation distort reported income?

Wages are not reflective of current labor rates.
Sales are not reflective of current product prices.
Depreciation is not reflective of current fixed-asset replacement costs.
Interest expense is not reflective of current borrowing rates.

Answer 53

Depreciation is not reflective of current fixed-asset replacement costs.

As time passes during a period of inflation, the replacement cost of fixed assets increases while the historical cost remains unchanged. Depreciation based on replacement cost would lower net income more than historical cost depreciation; so historical cost depreciation does not reflect current fixed-asset replacement costs.

The other answer choices are incorrect because wages, sales revenue, and interest expense are measured in current dollars rather than the historical currency. Therefore, they do not distort reported income.

Question 54

Mutual interdependence means that:
each firm is an oligopolistic industry produces a product that is a close substitute for those produced by rival firms.

when a monopolist chooses a price for its product, the quantity it will produce is dependent on the demand curve the firm faces.

each firm in an oligopolistic industry must consider the reactions of its rivals when it makes decision concerning how to price its product.

when a monopolistic competitive firm chooses the type of product differentiation to pursue, it is dependent on the desires and whims of the consumer.

Answer 54

each firm in an oligopolistic industry must consider the reactions of its rivals when it makes decision concerning how to price its product.

Question 55

OLIGOPOLY

here are a number of assumptions for an oligopoly:

(1) There are a many number of relatively large firms.
(2) Firms may produce either a standardized or differentiated product.
(3) Firms in the industry are independent.
(4) Firms tend to engage in non-price competition.

There generally are barriers to the entry for new firms into the industry, T/F
Firms cannot benefit from collusion T/F

A \_\_\_demand curve is one type of demand curve that a firm operating in an oligopoly might face .....Under these circumstances prices would tend to \_\_	If competitors fail to understand this logic, there is a strong possibility of a \_\_\_as firms engage in successive rounds of price cutting in an attempt to maintain market share.

Answer 55

False - small
True
false - interdependent
Trie

True
False -they can benefit from collusion

kinked
remain relatively stable.
price war

Question 56

OLIGOPOLY
\_\_\_\_is an implicit agreement that coordinates prices without having the firms engage in illegal collusion.
Factors of this include:
T/F
Frequent Price Changes
Price changes are announced by the \_\_\_
Goal is to \_\_\_

Answer 56

Price Leadership
False - Infrequent Price change
Price Leader
Discourage the entry of new firms into the entry and protect long term profitability.

Question 57

Which of the following is not a determinant of demand?

Disposable income
Consumer tastes and preferences
The price of other goods
Increase in income

Answer 57

Increase in Income

Question 58

DEMAND DETERMINAT

Examples of demand determinants are:

(1) the price of other goods.
(2) disposable income.
(3) consumer tastes and preferences.
(4) the number of buyers in the market for the product.
(5) future price expectations.
(6) advertising.

Answer 58

YEP

Question 59

LOW COST PROVIDER
The low-cost provider strategy works best in markets where:
1. Products produced by all firms are differnet
2. Buyers tend to be price sensitive and have the ability to shop for the best price
3. Consumers can easily switch from 1 product ot another

Answer 59

False - Identical
True
true

Question 60

The ____returns states that as a firm adds additional units of a variable resource to a fixed resource;

1. output (marginal product) will first increase at an increasing rate,
2. then it will then increase at a decreasing rate, and at some point
3. may become negative.

Answer 60

law of diminishing marginal

Question 61

Which of the following is an incorrect statement about a long-run cost of production?

Where all inputs are variable
Also known as the planning period
Expanding or contracting plant capacity
Concentrate on cutting costs

Answer 61

Concentrate on cutting costs

Question 62

When implicit costs are greater than zero and economic profits in an industry equal zero:

resources will be unproductive if they remain in the industry.
there will be no production in the short run.
resources will move to other industries
accounting profits will be greater than zero.

Answer 62

accounting profits will be greater than zero.

A firm that earns a normal profit (zero economic profit) has revenue equal to total cost (explicit plus implicit costs). Economic profit is generally lower (never higher) than accounting profit due to the fact that implicit costs are included in the calculation of in economic profits.

Question 63

TYPES OF PROFIT

____ profit is accounting profit minus implicit costs. It is the residual amount that goes to the owners of the firm

____profit is defined as the amount necessary for the firm to be willing to keep the resources deployed in the firm. _____profit is also defined as the point where the firm’s economic profit is equal to zero; that is, it is covering all its explicit costs and implicit costs

Answer 63

Economic

Normal

Question 64

In which of the following situations would it be advantageous for a country to export a manufactured product?

The country’s government prefers to be self-sufficient.
The country has an absolute advantage in the production of a complementary product.
The country has a comparative advantage in the production of the item.
The country has a higher opportunity cost for production of the item.

Answer 64

The country has a comparative advantage in the production of the item.

Question 65

MERGERS

Domestic or global mergers/acquisitions allow an organization to:

lower risk by diversifying into additional industries,
enter new markets,
provide possible opportunities for quick profitability in new areas,
provide opportunities to take advantage of economies of scope,
potentially lower costs along the value chain of activities, and
broaden the strength of resources and capabilities.

Answer 65

YEP

Question 66

Merger and acquisition strategies:

are best used for strengthening a firm’s presence in existing industries by gaining market share through acquisition of rivals.
are less desirable than strategic alliances due to the financial drain involved in a merger or acquisition.
can provide vertical integration that is expected to result in lower costs along the value chain of activities.
are needed in order to strengthen and increase a firm’s position in current markets.

Answer 66

can provide vertical integration that is expected to result in lower costs along the value chain of activities

Question 67

Suppose that a monopolist calculates that at the current level of sales and output, marginal costs is $3 and marginal revenue is $5. Under these conditions, profits could be increased by:

increasing output and decreasing price.
decreasing output and increasing price.
leaving output unchanged and decreasing price.
decreasing output and leaving price unchanged.

Answer 67

increasing output and decreasing price.

Question 68

The primary objective of variable interest rate loans is to:

guarantee lower interest rates for borrowers.
provide a tax shelter for lenders.
reduce the impact of rate changes on both parties.
All of the answer choices are correct.

Answer 68

reduce the impact of rate changes on both parties.

If a loan agreement contains a fixed rate of interest and market interest rates rise, the lender loses and the borrower benefits. A reduction in market interest rates produces the opposite effect.

Therefore, having a variable interest rate tied to some identifiable market rate would reduce the potential for significant losses or gains by both parties.

Question 69

The price elasticity of demand for a good is 2.0, and the quantity demanded is 5,000 units. The price increases by 10%. What is the new quantity demanded?

Answer 69

Therefore, given a 10% increase in price, there would be a 20% decrease in quantity demanded (2.0 = 20% ÷ 10%). The new quantity demanded would be 4,000 units [5,000 – (5,000 × 0.20)].

Price elasticity of demand = % Change in quantity demanded / % Change in price 2.0 (Given) = 20% (Solve) / 10% (Given)

Question 70

If demand is ___at the current price, then reducing the price will increase the total revenue and vice versa.

If demand is ___at the current price, then increasing the price will increase total revenue and vice versa.

If demand is ___elastic, then changing the price will have no impact on total revenue.

Answer 70

elastic
inelastic
unitarily

Question 71

If consumer income increases and as a result the demand for housing increases, we can conclude that housing is:

Answer 71

Normal good

Question 72

The supply chain business process includes all of the following except:

customer relationship management.
credit terms and methodologies.
customer service management.
customer orders.

Answer 72

credit terms and methodologies.

Arranging credit terms and methodologies is an objective, not a process. The supply chain process includes managing customer relationships, customer service, supply and demand, and customer orders and returns.

Question 73

Suppliers have more power when:

the product they are supplying is __from other products,
___products are not available,
few companies produce the __product, and
the ___industry is not an important customer to the supplying industry.

Answer 73

differentiated
substitute
same
purchasing

Question 74

Which of the following concepts can best be used to understand oligopoly behavior?

Concentration ratio
Interindustry competition
Game theory model
Herfindahl index

Answer 74

Game theory model

An oligopoly means few firms in the market, each relatively large. Game theory is a useful tool in choosing responses to actions of competitors in such a market.

Question 75

Supply chain metrics are created to measure the performance of the supply chain. If a firm developed metrics to measure things such as fill rates and on-time delivery, we would assume that they are trying to measure:

manufacturing flexibility.
supplier relationships.
customer service.
the flexibility the firm has to respond to environmental changes.

Answer 75

Customer Service

Question 76

If a company strives to be the low-cost provider within the industry, this means that:

if the goal is achieved, the company will earn higher profits than other companies in the industry.
if the goal is achieved, buyers are not very cost sensitive.
the company may underprice the competition and attract the buyers in a large enough volume in order to obtain satisfactory profits.

the company has focused on decreasing value chain costs rather than controlling manufacturing cost drivers.

Answer 76

the company may underprice the competition and attract the buyers in a large enough volume in order to obtain satisfactory profits.

Low cost providers have the ability to reduce nonvalue-added cost both with the manufacturing environment as well as along the value chain. At least some of these cost savings generally are passed on to the customer so that the company can underprice the competition. The low-cost strategy works best in a market where products produced by all firms in the industry are essentially identical and buyers tend to be price sensitive.

Question 77

_____have the ability to reduce nonvalue-added cost both with the manufacturing environment as well as along the value chain. At least some of these cost savings generally are passed on to the customer so that the company can ___the competition.

The ___strategy works best in a market where products produced by all firms in the industry are essentially ___and buyers tend to be __.

Answer 77

Low cost providers , underprice

low-cost, identical, price sensitive

Question 78

One of the outcomes of the recent globalization has been a shift in the pattern of ___with funds now increasingly flowing from emerging market economies to the more developed economies

Emerging market economies are capturing an increasing amount of foreign exchange earnings, either from the sale of raw materials or rising trade surpluses T/F

Answer 78

foreign direct investment (FDI),

Question 79

One of the changes that has occurred as a result of recent globalization has been a shifting pattern in foreign direct investment (FDI). The current pattern of FDI may be described as having:

investment flow from emerging market economies to other emerging market economies and more developed economies, as many of these emerging economies capture an increasing amount of foreign exchange earnings either from the sale of raw materials or rising trade surpluses from the export of manufactured goods.

investment flow from developed nations to the emerging market economies to take advantage of the higher rates of return that are available on investments in those nations.

Central Banks increase their use of official reserves to ensure that the emerging market economies maintain a weak currency to support continued export growth.

developed countries provide loans to emerging market economies to allow them to develop infrastructure that will then provide the necessary environment for manufacturing development.

Answer 79

investment flow from emerging market economies to other emerging market economies and more developed economies, as many of these emerging economies capture an increasing amount of foreign exchange earnings either from the sale of raw materials or rising trade surpluses from the export of manufactured goods.

Question 80

Average Average Average
Fixed Variable Total Marginal
Output Cost Cost Cost Cost
1 250 80 330 330
2 125 70 195 60
3 83 65 148 55
4 63 60 123 45
5 50 67 117 95
6 42 78 120 133
7 36 91 127 169
8 31 105 136 203
9 28 122 150 258
10 25 141 166 312
If the market price for the firm’s product is $133, the competitive firm would produce:

Answer 80

The firm will maximize profits at the point where marginal cost equals marginal revenue. For a perfectly competitive firm MR = P, therefore, MR = $133.

Thus the firm would produce 6 units. Economic profit is defined as total revenue minus total cost. TR = ($133 × 6) = $798; TC = ATC × output = ($120 × 6) = $720.

Therefore economic profit equals $78.

Question 81

Which of the following is not a direct benefit of globalization?

Creation of new jobs
` for farm workers
Decreased exports
Strengthening manufacturing and services

Answer 81

Decreased Exports

The benefits of globalization include creation of new jobs, increased wages, increased exports, strengthening of manufacturing and services sectors, and the creation of new research, technology, and skills.

Question 82

The benefits of globalization include creation of new jobs, increased wages, increased exports, strengthening of manufacturing and services sectors, and the creation of new research, technology, and skills. T/F

Answer 82

True

Question 83

The phrase, “The use of a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products,” is one possible definition for:

Answer 83

Supply chain management

Question 84

SUPPLY CHAIN

Supply chain management is simply defined as getting the right product to the right place, in the right quantity, at the right time, etc. at minimum cost. T/F

A network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products

A network of facilities that produce
A network of facilities and distribution

RANDOM
Diseconomies of scale begin where the average total cost starts ___

Answer 84

True to All

Going up

Question 85

All other things being equal, what is the most likely impact of imposing import tariffs?

Overallocation of resources to relatively efficient industries
Contraction of relatively efficient industries
Underallocation of resources to relatively inefficient industries
Increase in exports of domestically produced goods

Answer 85

Contraction of relatively efficient industries

Tariffs are essentially taxes or duties placed on an imported good or service by a domestic government, making domestic goods cheaper and imported goods more expensive.

Tariffs protect inefficient domestic industries at the expense of efficient industries, creating an internal misallocation of resources.

Question 86

NEGATIVES ABOUT IMPORTED TARIFFS

Tariffs protect inefficient domestic industries at the expense of __, creating an internal misallocation of resources.

The increased cost of imported products can lead to an increase in domestic ____.

Domestic producers will take advantage of the situation and raise their prices b/c of ____

Tariffs decrease the amount of ___

Answer 86

efficient industries
inflation
because of less competition
imported goods

Question 87

ECONOMIES OF SCALE / DISECON OF SCALE
____occur when increases in a firm’s capacity and output are accompanied by decreases in the firm’s long-run average cost of production

Primary causes for economies of scale include:
Increased ___and managerial specialization
Use more ____equipment and larger facilities
the ability to spread __such as R&D & Advertise

__occur when increases in a firm’s capacity and output are accompanied by increases in the firm’s average cost of production in the long run.

Primary causes for diseconomies of scale include:
Increased difficulty in efficiency controlling firms __due to expansion
Reduced ___flexibility
increased worker __, causes increased mgmt supervision

Answer 87

Economies of scale

Labor
efficient
costs

Diseconomies of scale
operation
decision-making
alienation

Question 88

Which of the following does not describe monopolistic competition?

A large number of independent buyers and sellers
Free entry and exit from the industry
Firms make identical products
Significant use of advertising to drive business

Answer 88

Firms make identical products

Note: there are a large number of independent buyers & sellers

Question 89

Non-price competition is also known as what?
Monopolies use non-price competition?
Monopolies have large # of buyers/sellers?
Goal of advertising is to make demand less__
Product differenation makes firms compete on what?

Answer 89

Advertising
Yes
YEs
Less elastic
Quality, price, marketing

Question 90

Joan quit her job where she earned $50,000. She started a business by using $100,000 that she had just inherited instead of investing the money that could have earned 10% a year. The business had sales that equaled $250,000 the first year and expenses equal to $160,000. The economic profit for business for the first year was:

Answer 90

$30k

Economic profit equals revenue minus both explicit and implicit costs. $250,000 - $160,000 - $50,000 - ($100,000 × 10%) = $30,000.

Question 91

Increased demand for product A increases the demand for resources used to produce product A. What is the best explanation for the increase in the demand for resources?

The theory of derived demand is working.
Product A is in an expanding industry.
The theory of the “invisible hand” is working.
The demand for product A is highly elastic.

Answer 91

The theory of derived demand is working.

Derived demand is a term used in economic analysis that describes the demand placed on one good or service (e.g., material, labor) as a result of changes in the price for some other related end-product

The theory of the invisible hand describes the unobservable market force that helps the demand and supply of goods in a free market automatically reach equilibrium

An expanding industry is the sector of the economy experiencing a higher-than-average growth rate

Question 92

____is a term used in economic analysis that describes the demand placed on one good or service (e.g., material, labor) as a result of changes in the price for some other related end-product . Ex: Increase demand for product A increases the RESOURCES for product A.

The theory of the ___describes the unobservable market force that helps the demand and supply of goods in a free market automatically reach equilibrium

An ___industry is the sector of the economy experiencing a higher-than-average growth rate

Answer 92

Derived demand

invisible hand

expanding

Question 93

Which of the following is not a primary use to which of funds invested by sovereign wealth funds (SWFs) would be put?

Investing in land in another country to produce staple crops for export to their country in a way designed to circumvent the workings of world commodity markets

Diversifying the use of foreign exchange reserves and attempting to improve food and energy security

Attempting to make investments that would allow their citizens to increase their savings rate to ensure that the citizens provide their own social safety net

Acquiring technologies, brands, and resources designed to improve productivity and improve management techniques

Answer 93

Attempting to make investments that would allow their citizens to increase their savings rate to ensure that the citizens provide their own social safety net

This has nothing to do with SWF

Question 94

A government is most likely to reduce taxes on investments when:

the real exchange rate is expected to be unusually high.
inflation is expected to be unusually low.
the gross domestic product is expected to be unusually high.
capital spending is expected to be unusually low.

Answer 94

When capital spending is expected to be unusually low, the government might pass a tax cut in order to stimulate the economy.

For the other three answer choices listed, consumers will already be spending and a stimulus is not needed.

Question 95

Which of the following is not a market influence on business?

Purchasing power
Inflation
Unemployment
Cost-of-living adjustments (COLAs)

Answer 95

COLA

Question 96

Which of the following statements is correct regarding the variety and price of products produced under monopolistic competition as compared to production under perfect competition?

The monopolistically competitive industry produces a greater variety of products at a lower cost per unit.
The monopolistically competitive industry produces a greater variety of products at a higher cost per unit.
The monopolistically competitive industry produces a smaller variety of products at a lower cost per unit.
The monopolistically competitive industry produces a smaller variety of products at a higher cost per unit.

Answer 96

The monopolistically competitive industry produces a greater variety of products at a higher cost per unit.

This is b/c companies acquire so many companies that they end up producing a shit ton of products for a higher price b/c they can

Question 97

Which of the following pricing policies results in establishment of a price to external customers higher than the competitive price for a given industry?

Collusive pricing
Dual pricing
Predatory pricing
Transfer pricing

Answer 97

Collusion is when competitors agree to restrict production so as to increase the price they receive for their product.

Dual pricing is a practice of setting different prices for a product dependent on the currency used to buy i

Predatory pricing means lowering prices to such an extent as to drive competitors out of business

A transfer price is the price charged by one unit within a larger business to another unit in that business.

Question 98

___Pricing is when competitors agree to restrict production so as to increase the price they receive for their product.

___pricing is a practice of setting different prices for a product dependent on the currency used to buy i

__pricing means lowering prices to such an extent as to drive competitors out of business

A ___price is the price charged by one unit within a larger business to another unit in that business.

Answer 98

Collusive

Dual Pricing
Predatory

Transfer Price

Question 99

In ___flow management, firms produced products that were made-to-stock and placed in the distribution channel based on historical forecasts.

Within ____, production is pulled through the plant in response to specific customer needs and requires that manufacturing processes have the flexibility to respond to market changes.

If new products are essential to the success of the firm, then the firm must have a process in place that will identify existing and potential customer needs. T/F

Answer 99

traditional manufacturing

supply chain management

True