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34.
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer.
While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit.
This price differentiation has mainly been attributed to the companies' capital decisions.
While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds
from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital,
which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's
competitive advantage is
35.
_____ is best described as decreases in cost per unit as output increases.
36.
Economies of scale do
not
allow firms to
37.
_____ is best described as the output range needed to bring down the cost per unit as much
as possible, allowing a firm to stake out the lowest-cost position that is achievable through
economies of scale.
38.
When a firm manufactures 2,000–3,000 units of a product, it incurs an average cost of $10 per
unit. When it manufactures 3,000–4,000 units of the same product, the average cost per unit
reduces to $7. However, manufacturing beyond 4,000 units will raise the average cost per unit
to $9. Which of the following is the firm's minimum efficient scale?
39.
When a firm operates at the minimum efficient scale, the
40.
To be cost-competitive, a firm should
41.
When a firm operates at an output level of 9,000 units, the per-unit cost is $5. When the
production is between 10,000–12,000 units, the per-unit cost is $4. At a production level of
13,000 units, the production cost is again $5 per unit. At 14,000 units and above, the
production cost increases further. At what output level does the firm experience economies of
scale?
42.
KitchenThings Inc. is a company that manufactures plastic kitchenware. It operates at an
output level that allows it to keep its unit cost per output to the lowest in the industry. This in
turn allows KitchenThings to be the price leader. Other competing companies cannot operate
at the same level due to a lack of consumer demand for their products. This puts them at a
competitive disadvantage. In this scenario, the cost driver behind KitchenThings's strategic
position is
43.
DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive
operation. The company's marketing and sales, logistics, administrative, and other such
related costs get divided between a large number of product units stocked in its stores. This
makes it difficult for smaller retail stores and supermarkets to compete against
DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its
44.
A firm experiences _____ when there are increases in cost per unit as output increases.
45.
When Jean Cult Inc. was operating at the minimum efficient scale of 10,000–12,000 units per
month, the firm's cost per unit was $20. However, when the output level was increased
beyond 12,000 units, the cost per unit increased to $22. This increase was attributed to the
wear-and-tear of the machinery, and complexities of managing and coordinating. What is this
phenomenon known as?
46.
A firm experiences diseconomies of scale when it
47.
Diseconomies of scale refer to
48.
Bass Watches Inc. initially spent eight man-hours to assemble a wristwatch. But as the
production doubled, the number of hours spent on assembling a watch reduced by 20 percent.
This increase in productivity reduced the company's cost per unit. What is this phenomenon
referred to as?
49.
Which of the following statements accurately brings out the difference between economies of
scale and learning effects?
50.
As the cumulative output in a firm increases, managers learn how to optimize the production
process and improve workers' performance through repetition. This drives down the per-unit
cost. Which of the following phenomena is best described here?
51.
Which of the following statements is true of learning curves?
52.
What does it mean for a firm to have an 80 percent learning curve?
53.
A firm's learning curve is steeper than that of its competitor. What does this imply?
54.
At a certain output level, the per-unit cost incurred by a firm to manufacture a product is $5.
Other factors remaining constant, what will be the new per-unit cost if the cumulative output
is doubled, and the firm is able to achieve an 80 percent learning curve?
55.
At a certain output level, the per-unit cost incurred by a firm to manufacture a product was
$60. Once the cumulative output doubled, the cost per unit reduced to $54. All other factors
remaining constant, the firm has been able to achieve a(n)
56.
Which of the following situations will have greater effects from economies of scale than from
learning effects?
57.
Combining economies of learning with the existing production technology allows a firm to
58.
The concept of a(n) _____ attempts to capture both learning effects and process
improvements at firms.
59.
When a firm combines experience based learning and process innovation, the firm
60.
Allure is a cosmetic brand that pursues a cost-leader strategy. Which of the following
statements is true of the cosmetic brand?
61.
A cost-leader is protected from the threat of new entrants primarily due to its
62.
According to the five forces model, which of the following is viewed as a major risk to a
business pursuing a cost-leadership strategy?
63.
Which of the following sources of differential appeal is least effective in helping a firm sustain
its advantage?
64.
A differentiator is least likely to be threatened by increases in input prices due to powerful
suppliers when the
65.
A differentiation strategy works best when a
66.
In a successful _____ strategy, the trade-offs between differentiation and low cost are
reconciled.
