What is one way to measure a firm’s willingness-to-pay?
a) Marginal profit per unit of production
b) Value added analysis
c) Cost-benefit analysis
d) Input-output analysis
e) Sales-per-cost analysis
What term does Sutton use to describe the costs of establishing a credible brand?
a) Brand investment
b) Cost of brand establishment
c) Cost of advertising
d) Endogenous sunk cost
e) Market establishment cost
What type of pricing involves a firm quoting a single delivered price for all buyers with
the firm absorbing any freight charges itself?
a) Uniform delivered pricing
b) Uniform FOB pricing
c) Uniform customer pricing
d) Uniform favored pricing
e) Uniform competitive pricing
What is the source from which a person derives legitimate or formal power?
a) Due to status
b) Possession of specialized knowledge
c) Ability to punish
d) Ability to grant rewards
e) Position within a hierarchy
Select the letter corresponding to the best answer. For a given consumer, any
price-quality combination along the indifference curve yields the _______________.
a) Same consumer surplus
b) Same maximum willingness-to-pay
c) High consumer surplus
d) Low consumer surplus
e) Same competitive advantage
Which of the following trends or methods has since helped reduce the pricing rivalry
that had intensified by the late 1990s?
a) Patients began accepting MCOs with “narrow networks” and MCOs had the upper
hand in negotiating with hospitals for inclusion in networks
b) Hospitals removed brand identities
c) Hospitals dropped “centers of excellence” from their hospitals
d) Hospitals consolidating away from related products
e) Hospitals consolidated (conducted mergers)
What term describes the differentiation of a product when only some consumers prefer
it to competing products (holding price equal)?
a) Horizontal differentiation
b) Vertical differentiation
c) Idiosyncratic differentiation
d) Spatial differentiation
e) Non-price differentiation
Which of the following is a resource?
a) Brand promotion skills
b) Yield management capabilities
c) Ability to manage sourcing and procurement functions
d) Workers with firm-specific expertise or know-how
e) Ability to integrate order-taking, procurement, manufacturing and out-bound logistics
What term best describes an agent who is indifferent between a sure thing and a gamble
of equal expected value?
a) Risk sharing
b) Risk seeking
c) Risk neutral
d) Risk averse
e) Risk premium
Which of the following is not a potential limitation of the five-forces framework?
a) It pays little attention to factors that might affect demand
b) It focuses on a whole industry rather than on individual firms that may occupy
unique positions that insulate them from some competitive forces
c) The framework does not explicitly account for the role of government, except when
government is a supplier or buyer
d) The framework provides a structured way to systematically work through
wide-ranging and often complex issues
e) The framework is a qualitative analysis method
What are agency costs?
a) Costs of the sales force
b) Costs associated with slack effort and with the administrative controls to deter it
c) Costs related to general and administrative expenses
d) Costs associated with outsourcing of firm functions
e) Costs attributed to the use of professional service firms
What is the minimum efficient scale (MES) of production?
a) The point on an average cost curve where the cost per unit begins to decline more
rapidly
b) The minimum point on a U-shaped average cost curve
c) The minimum level of production at a plant for it to be considered profitable
d) The level of production for a small sized plant
e) The threshold at which capacity is constraining for a firm’s production
Benefit proximity refers to which of the following?
a) Competing firms offering products with exactly the same benefit
b) Cost leading firms offering products with slightly less benefit
c) Product benefits that cannot easily be differentiated by the consumer
d) Cost leading firms offering products with slightly more benefit
e) The inability for competing firms to produce products with similar benefits
Which of the following terms best describes the principle stating that when allocating
effort among a variety of tasks, employees will tend to exert more effort toward those
tasks that are rewarded?
a) Effort allocation principle
b) Premium principle
c) Compensation principle
d) Risk-reward principle
e) Multitask principle
What term describes the differentiation of a product when it is unambiguously better or
worse than competing products?
a) Horizontal differentiation
b) Vertical differentiation
c) Idiosyncratic differentiation
d) Spatial differentiation
e) Non-price differentiation
What kind of competition is generally described as quantity competition?
a) Bertrand competition
b) Cournot competition
c) Perfect competition
d) Chamberlin competition
e) Monopolistic competition
Which of the following does not tend to affect the threat of entry?
a) Expectations about pre-entry competition
b) Government protection of incumbents
c) Consumers highly valuable reputation/consumers are brand loyal
d) Experience curve
e) Network externalities
How are the coordination problems that exist around the construction of a new home
generally solved?
a) Pricing
b) Software
c) Bureaucracy
d) Contractor
e) Markets
Matchmakers between manufacturers and sellers are called:
a) Agents
b) Factors
c) Brokers
d) Merchants
e) None of the Above
What tactical term best describes the capacity relationship between Toyota and Honda
such that Toyota’s response is to reduce production output of the Rav 4 if Honda were to
first announce a large increase in the production of the CR-V that drove down prices?
a) Tough commitment
b) Strategic complement
c) Soft commitment
d) Strategic substitute
e) Duopoly
In a two firm market, let the marginal cost of producing a product be $20, the market
demand be given by the function Q=60-P/2 and the market quantity be equal to Q1+Q2.
What is the Cournot equilibrium quantity each firm would produce in this market?
In a two firm market, let the marginal cost of producing a product be $20 and the
market demand for their products be given by Q1=12-P1+P2 and Q2=12-P2+P1. What is
the Bertrand equilibrium price each firm would produce in this market?
In a six-firm market, if all firms charge the monopoly price, the profit equals $120,000.
In that same six-firm market, if all firms instead charge the prevailing price, the profit is
$60,000. If the pricing period is one-month long, what is the maximum monthly
discount rate implied for each firm to still have an incentive to independently price at
the monopoly level?
Suppose you manufacture 10 million hard drives per year specifically for Dell laptop
computers. Suppose your average variable cost C=$20/unit, annualized cost of
investment to build a hard drive factory I=$30 million, and the market price (bailout
market price in the event Dell does not buy) Pm=$22/unit. If Dell agrees to purchase the
10 million hard drives at a price P*=$25/unit and subsequently renegotiates to only
purchase for $22.50/unit, what has Dell increased its own profits by?
Given an employee cost of effort function (where e is given in hours worked per week
and each unit of e produces an extra $100 in sales:
What is the cost of effort for a 37 hour week? What is the cost of effort for a 43 hour
week? If the firm offers a salary only job of $500 per week, what is the employee’s
payoff net of effort costs for a 49 hour work week?
Suppose the demand for a product faces by a monopolist firm is given by Q=60-P/2. If
the marginal cost of producing the product is $20, what is the profit maximizing price
the firm should charge for the product? What are the firm’s profits?
In the following sequential decision tree, Alpha chooses a strategy first and then Beta
chooses a strategy. Using backwards inductions, determine the Subgame Perfect Nash
Equilibrium strategies and payoffs?
Suppose two hot dog stands, Al’s & Bob’s, position themselves at different ends of a
1000 yard stretch of beach. Assume there are 100 beach goers evenly distributed along
the stretch of beach and travel costs are $.01 per yard. If Al charges $1 for his hot dogs
and Bob charges $2 for his hot dogs, what is the cost of purchasing a hot dog from each
stand for a hungry beachgoer situated at a position D yards from Al’s end of the beach?
How many consumers will go to Al’s and how many will go to Bob’s?
In a three firm market where the market share split is 50%, 30% & 20%, what is the
Herfindahl index?
Suppose a firm has $50 million to invest in a new market. Given market uncertainties,
the firm forecasts a high-scenario where the present value of the investment is $200
million and a low-scenario where the present value of the investment is $20 million. If
the firm believes each scenario is equally likely and invests today, what is the net
present value of the investment?