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27) Top management should be viewed as part of the firm's
A) primary activities.
B) experience curve.
C) infrastructure.
D) universal strategy.
28) ________ can be defined as the rate of return that the firm makes on its invested capital, which
is calculated by dividing the net profits of the firm by total invested capital.
A) Profitability
B) Performance
C) Cash flow
D) Efficiency
29) The percentage increase in net profits over time measures
A) capital return.
B) profitability.
C) market growth.
D) profit growth.
30) Which of the following statements is true?
A) The way to increase the profitability of a firm is to create a greater number of products.
B) The amount of value a firm creates is measured by the difference between its costs of
production and the value that consumers perceive in its products.
C) The more value customers place on a firm's products, the lower the price the firm is able to
charge for those products.
D) The price a firm charges for a good or service is typically more than the value the customer
places on that good or service.
31) The price a firm charges for a good or service is typically less than the value placed on that
good or service by the customer. This is because
A) the customer's disposable income is significantly higher than what the market demands.
B) the customer captures some of that value in the form of a consumer surplus.
C) regulatory mechanisms ensure that the customer is not overcharged for products/services.
D) marketers implement psychological pricing tactics to ensure that customers perceive the prices
to be low.
32) The value of a product to an average consumer is V; and the average price that the firm can
charge a consumer for that product is P. Here, V – P can be termed as
A) consumer surplus per unit.
B) producer surplus per unit.
C) profit growth.
D) profit per unit sold.
33) A consumer surplus can be best described as
A) what the consumer has "left over" after a purchase.
B) how much extra a consumer has to pay for a product.
C) value for the money.
D) the premium charged for a quality product.
34) A strategy that focuses on increasing the attractiveness of a product is referred to as
A) a differentiation strategy.
B) a low-cost strategy.
C) an effectiveness strategy.
D) an efficiency strategy.
35) The efficiency frontier has a convex shape because of
A) consumer surplus.
B) diminishing returns.
C) profitability.
D) differentiation strategy.
36) ________ imply that when a firm already has significant value built into its product offering,
increasing value by a relatively small amount requires significant additional costs.
A) Efficiency matrixes
B) Diminishing returns
C) Cost plus curves
D) Strategy convex curves
37) The basic strategy paradigm suggests that to maximize its profitability, a firm should do which
of the following?
A) Choose, according to strategy, any position on the efficiency frontier as all positions are viable.
B) Pick a position on the efficiency frontier that is viable in the sense that there is a low product
demand anticipated.
C) Configure its external operations so that they support the position of diminishing returns.
D) Make sure that the right organization structure is in place to execute its strategy.
38) ________ activities are basically concerned with creating the product, marketing and
delivering the product to buyers, and providing support and after-sales service.
A) Support
B) Subordinate
C) Ancillary
D) Primary
39) Which of the following is an example of a primary activity in a firm's value chain?
A) information systems
B) research and development
C) logistics
D) human relations
40) Which of the following is an example of a support activity in a firm's value chain?
A) research and development
B) customer service
C) human resources
D) marketing and sales
41) ________ activities of the value chain provide inputs that allow the primary activities to occur.
A) Complementary
B) Basic
C) Core
D) Support
42) Michael Porter argues that
A) those firms that create superior value will achieve superior profitability.
B) standardization of product is a basic strategy for attaining a competitive advantage in an
industry.
C) it is necessary for a firm to have the lowest cost structure or create the most valuable product.
D) it is important that the gap between value and the cost of production be smaller than that of
competitors.
43) The term ________ refers to skills within the firm that competitors cannot easily match or
imitate and that may exist in the firm's value creation activities.
A) experience curves
B) core competence
C) economies of scale
D) learning effects
44) Location economies are the economies that arise from performing a ________ activity in the
optimal location for that activity.
A) universal need
B) core competence
C) value creation
D) localization strategy
45) The ________ refers to systematic reductions in production costs that have been observed to
occur over the life of a product.
A) economies of scale
B) value creation
C) location economies
D) experience curve
46) Global expansion offers companies the opportunity to generate greater profits than companies
that focus strictly on
A) value creation.
B) economies of scale.
C) location economies.
D) the domestic market.
