Question 1

Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

Accepted Answer

A) True 
 B)False

Question 2

What are the three financial ratios that constitute return on revenue, and what do they tell us?

Accepted Answer

Return on revenue is broken down into th...

Question 3

How does the triple-bottom line approach help managers? Explain with the help of an example.

Accepted Answer

Student examples will vary. A sample res...

Question 4

What is risk capital?

Accepted Answer

From the shareholders' perspective, the ...

Question 5

Explain how business models put strategy into action.

Accepted Answer

Strategy is a set of goal-directed actio...

Question 6

What is the relationship between producer surplus and consumer surplus?

Accepted Answer

The difference between the price charged...

Question 7

The value a consumer attaches to a product or service is captured in the

Accepted Answer

A)   least price a consumer is willing to pay for it.
B)   consumer's maximum willingness to pay for it.
C)   expenses incurred by the firm in manufacturing it.
D)   difference between the price charged for it and the cost to produce it.E) A) and C)
F) A) and B)

Question 8

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Accepted Answer

A)   Market volatility makes it difficult to assess firm performance through these measures, particularly in the short-term.
B)   These tools fail to indicate how the stock market views all available public information about a firm's expected future performance.
C)   These tools measure competitive advantage in absolute terms rather than relative terms.
D)   Only the book value of the share prices is taken into account when applying these measures, and not the market value.E) All of the above
F) B) and D)

Question 9

Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced scorecard approach.

Accepted Answer

A) True 
 B)False

Question 10

________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.

Accepted Answer

A)   Return on revenue
B)   Risk capital
C)   Working capital turnover
D)   Revenue per employeeE) All of the above
F) B) and C)

Question 11

How does consumer demand affect fixed costs and variable costs?

Accepted Answer

Fixed costs are independent of consumer ...

Question 12

What are opportunity costs in general? What are the opportunity costs for entrepreneurs?

Accepted Answer

Opportunity costs capture the value of t...

Question 13

Serena paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?

Accepted Answer

A)   $900
B)   $1,100
C)   $550
D)   $200E) C) and D)
F) A) and C)

Question 14

The cost of capital to create a product is a fixed cost because it is

Accepted Answer

A)   directly proportional to the output level.
B)   uniform throughout all firms and industries.
C)   not a part of the profit calculations.
D)   unaffected by consumer demand.E) A) and D)
F) All of the above

Question 15

Mobius Electronics incurs a cost of $350 to produce one unit of a cell phone. The company's management has priced the product at $600 in the market. Considering the technological advancement of the cell phone, customers perceive its value to be around $800. What is the economic value created in this scenario?

Accepted Answer

A)   $350
B)   $450
C)   $800
D)   $200E) None of the above
F) C) and D)

Question 16

Economic value creation is best expressed as

Accepted Answer

A)   producer surplus minus consumer surplus.
B)   consumer surplus minus cost of production.
C)   consumer surplus plus firm profit.
D)   producer surplus plus firm profit.E) A) and B)
F) A) and C)

Question 17

Which of the following scenarios best illustrates bundling?

Accepted Answer

A)   Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes.
B)   Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it.
C)   Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later.
D)   Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.E) B) and D)
F) A) and B)

Question 18

The top management at Sunshine Vitamins, through rigorous testing, ensures that the company develops and sells vitamins that are free of harmful side effects. Also, the company ensures that the chemical waste generated in the manufacturing process is kept to a bare minimum and is disposed of according to the regulations of the Environmental Protection Agency. The management assesses its overall performance based on these dimensions. Thus, the managers at Sunshine Vitamins are applying the ________ approach to measure firm performance.

Accepted Answer

A)   economic value creation
B)   shareholder value creation
C)   triple-bottom-line
D)   accounting profitabilityE) All of the above
F) A) and D)

Question 19

In an economic context, strategy for producers is primarily about

Accepted Answer

A)   distributing the economic value created equally between consumers and themselves.
B)   reducing the difference between consumer's willingness to pay for a product and the cost to produce it.
C)   capturing the economic value created as much as possible.
D)   lowering producer surplus and increasing consumer surplus.E) A) and C)
F) B) and D)

Question 20

Discuss the limitations associated with using accounting data to measure competitive performance.

Accepted Answer

Although accounting data tend to be read...

Exam 5: Competitive Advantage, Firm Performance, and Business Models

What are opportunity costs in general? What are the opportunity costs for entrepreneurs?

Correct Answer
verified
Opportunity costs capture the value of t...
View Answer

Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced scorecard approach.

Correct Answer
verified

Which of the following scenarios best illustrates bundling?

Correct Answer
verified

The cost of capital to create a product is a fixed cost because it is

Correct Answer
verified

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Correct Answer
verified

Discuss the limitations associated with using accounting data to measure competitive performance.

Correct Answer
verified
Although accounting data tend to be read...
View Answer

How does consumer demand affect fixed costs and variable costs?

Correct Answer
verified
Fixed costs are independent of consumer ...
View Answer

________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.

Correct Answer
verified

Explain how business models put strategy into action.

Correct Answer
verified
Strategy is a set of goal-directed actio...
View Answer

What are the three financial ratios that constitute return on revenue, and what do they tell us?

Correct Answer
verified
Return on revenue is broken down into th...
View Answer

Correct Answer
verified

Serena paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?

Correct Answer
verified

What is the relationship between producer surplus and consumer surplus?

Correct Answer
verified
The difference between the price charged...
View Answer

In an economic context, strategy for producers is primarily about

Correct Answer
verified

Economic value creation is best expressed as

Correct Answer
verified

How does the triple-bottom line approach help managers? Explain with the help of an example.

Correct Answer
verified
Student examples will vary. A sample res...
View Answer

Correct Answer
verified

What is risk capital?

Correct Answer
verified
From the shareholders' perspective, the ...
View Answer

Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

Correct Answer
verified

The value a consumer attaches to a product or service is captured in the

Correct Answer
verified

Exam 5: Competitive Advantage, Firm Performance, and Business Models

What are opportunity costs in general? What are the opportunity costs for entrepreneurs?

Correct AnswerverifiedOpportunity costs capture the value of t...View AnswerShow Answer

Managers must first develop a strategy that is likely to produce a competitive advantage before implementing a balanced scorecard approach.

Correct AnswerverifiedShow Answer

Which of the following scenarios best illustrates bundling?

Correct AnswerverifiedShow Answer

The cost of capital to create a product is a fixed cost because it is

Correct AnswerverifiedShow Answer

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization?

Correct AnswerverifiedShow Answer

Discuss the limitations associated with using accounting data to measure competitive performance.

Correct AnswerverifiedAlthough accounting data tend to be read...View AnswerShow Answer

How does consumer demand affect fixed costs and variable costs?

Correct AnswerverifiedFixed costs are independent of consumer ...View AnswerShow Answer

________ is best described as a measure of how effectively capital is being used by a firm to generate revenue.

Correct AnswerverifiedShow Answer

Explain how business models put strategy into action.

Correct AnswerverifiedStrategy is a set of goal-directed actio...View AnswerShow Answer

What are the three financial ratios that constitute return on revenue, and what do they tell us?

Correct AnswerverifiedReturn on revenue is broken down into th...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Serena paid $900 for a camera that she thought was worth $1100 for all the features included in it. For the consumer electronics firm selling the camera, however, the cost of producing the camera was only $350. What is the consumer surplus in this scenario?

Correct AnswerverifiedShow Answer

What is the relationship between producer surplus and consumer surplus?

Correct AnswerverifiedThe difference between the price charged...View AnswerShow Answer

In an economic context, strategy for producers is primarily about

Correct AnswerverifiedShow Answer

Economic value creation is best expressed as

Correct AnswerverifiedShow Answer

How does the triple-bottom line approach help managers? Explain with the help of an example.

Correct AnswerverifiedStudent examples will vary. A sample res...View AnswerShow Answer

Correct AnswerverifiedShow Answer

What is risk capital?

Correct AnswerverifiedFrom the shareholders' perspective, the ...View AnswerShow Answer

Competitive advantage goes to the firm that maximizes the difference between the cost of producing a good and the retail price that consumers pay.

Correct AnswerverifiedShow Answer

The value a consumer attaches to a product or service is captured in the

Correct AnswerverifiedShow Answer

Correct Answer
verified
Opportunity costs capture the value of t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Although accounting data tend to be read...
View Answer

Correct Answer
verified
Fixed costs are independent of consumer ...
View Answer

Correct Answer
verified

Correct Answer
verified
Strategy is a set of goal-directed actio...
View Answer

Correct Answer
verified
Return on revenue is broken down into th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The difference between the price charged...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Student examples will vary. A sample res...
View Answer

Correct Answer
verified

Correct Answer
verified
From the shareholders' perspective, the ...
View Answer

Correct Answer
verified

Correct Answer
verified