Question 1

Degree of rivalry is:

Accepted Answer

A)   high when excess capacity of existing firms is low.
B)   low when fixed costs of existing firms are high.
C)   high when fixed costs of existing firms are low.
D)   high when fixed costs of existing firms are high.E) A) and B)
F) A) and C)

Question 2

In a corporation, one important source of value is that 'whole organization' is worth more than the sum of its parts. This is called:

Accepted Answer

A)   team production capabilities.
B)   collective cost analysis benefits.
C)   complementary goods value creation.
D)   substitute goods value creation.E) A) and B)
F) A) and D)

Question 3

Many manufacturers attempt to build fairly close relationships with the firms that supply their packaging and boxes. Why?

Accepted Answer

Many manufacturers attempt to build fair...

Question 4

Besides barriers to entry, what are some of the other reasons for incumbents to maintain their profits.

Accepted Answer

Besides barriers to entry, the...

Question 5

Putting together two goods - shaving cream and razors - to increase value is using the power of:

Accepted Answer

A)   complementary goods.
B)   substitute goods.
C)   unrelated goods.
D)   technologically advanced goods.E) B) and C)
F) A) and D)

Question 6

Successful invention and innovation in the marketplace:

Accepted Answer

A)   can create value and is easy to capture.
B)   cannot create value and is difficult to capture.
C)   can create value but is often difficult to capture.
D)   is not important to most company's strategy.E) A) and C)
F) None of the above

Question 7

The fast food industry from Back Yard Burgers to KFC promises good food delivered quickly. The value of the consumer's time:

Accepted Answer

A)   is less important than productions costs.
B)   is a key component in creating value for the firm and the consumer.
C)   is usually so low that fast food is unimportant in the marketplace.
D)   must be discounted to make sure it is negative.E) A) and B)
F) B) and C)

Question 8

What happens to producer surplus and consumer surplus if transactions costs are reduced?

Accepted Answer

Consumer-borne transaction costs reduce ...

Question 9

Draw supply and demand for a product showing the equilibrium price and quantity. Illustrate what would happen if all the transactions costs of market were reduced. Generally, what is the impact of transactions costs on the operation of the marketplace?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The dashed supply and demand curves ill...

Question 10

Manufacturers of printers and computers set prices independently. This means that they:

Accepted Answer

A)   do not consider the positive effect that their lower prices have on the other's profit.
B)   do not consider the negative effect that their lower prices have on the other's profit.
C)   do not consider the positive effect that their higher prices have on the other's profit.
D)   do not consider the negative effect that their higher prices have on the other's profit.E) B) and D)
F) All of the above

Question 11

Economies of scope are said to exist when:

Accepted Answer

A)   one firm produces many products rather than separate firms for each.
B)   many firms produce many products rather than one firm producing all.
C)   many firms produce a single product rather than one firm.
D)   one firm produces multiple products rather than separate firms producing all.E) All of the above
F) C) and D)

Question 12

With creating value we have:

Accepted Answer

A)   a shift in both the demand and supply curves to the right.
B)   a shift in both the demand and supply curves to the left.
C)   demand shift to the right and supply to the left.
D)   demand shift to the left and supply to the right.E) All of the above
F) B) and C)

Question 13

What is the relation between value creation and transactions cost?

Accepted Answer

Value is created when transactions costs...

Question 14

If consumers find that there are substantial transactions costs to purchasing a product, then:

Accepted Answer

A)   overall consumer demand is greater at each price.
B)   overall consumer demand is the same at each price.
C)   overall consumer demand is less at each price.
D)   equilibrium price and quantity both fall.E) A) and B)
F) All of the above

Question 15

Setting up of outlet malls in rural highways is an example of:

Accepted Answer

A)   increased consumer transactions cost.
B)   increased producer transactions cost.
C)   reduced consumer transactions cost.
D)   reduced producer transactions cost.E) A) and B)
F) B) and D)

Question 16

Since September 11, 2001, longer lines, longer airport waits, and limits on carry-on luggage have all contributed to:

Accepted Answer

A)   an increase vacation air travel.
B)   an increase in business air travel.
C)   a decline in value of air travel.
D)   an increase in value of air travel.E) A) and B)
F) C) and D)

Question 17

Strategy refers to the general policies that managers adopt to increase:

Accepted Answer

A)   costs.
B)   the number of customers at the same price.
C)   the rate of technological change.
D)   the generation of profits.E) B) and D)
F) None of the above

Question 18

Paul Romer argues that "what underlies this process [economic success] ...... are instructions, formulas, recipes, and methods of doing things." He is referring to the:

Accepted Answer

A)   hardware or tangible assets.
B)   software or intangible assets.
C)   wetware or soup recipes.
D)   hardware or human resources.E) A) and D)
F) A) and C)

Question 19

If transactions costs can be reduced in a marketplace, then total producer and consumer surplus will:

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first increase and then decrease.E) A) and C)
F) A) and D)

Question 20

In a competitive market, the firm has a difficult time capturing value due to the large number of rivals. But it can be successful at capturing value if the:

Accepted Answer

A)   firm's cost curves are higher than rivals.
B)   firm's superior productivity is based on value of the whole organization.
C)   firm's superior productivity is based on selected components of superiority within the firm.
D)   demand for the firm's product is inelastic.E) None of the above
F) B) and D)

Exam 8: Economics of Strategy: Creating and Capturing Value

What is the relation between value creation and transactions cost?

Correct AnswerverifiedValue is created when transactions costs...View AnswerShow Answer

Manufacturers of printers and computers set prices independently. This means that they:

Correct AnswerverifiedShow Answer

Degree of rivalry is:

Correct AnswerverifiedShow Answer

With creating value we have:

Correct AnswerverifiedShow Answer

Strategy refers to the general policies that managers adopt to increase:

Correct AnswerverifiedShow Answer

If transactions costs can be reduced in a marketplace, then total producer and consumer surplus will:

Correct AnswerverifiedShow Answer

Economies of scope are said to exist when:

Correct AnswerverifiedShow Answer

Successful invention and innovation in the marketplace:

Correct AnswerverifiedShow Answer

Setting up of outlet malls in rural highways is an example of:

Correct AnswerverifiedShow Answer

Many manufacturers attempt to build fairly close relationships with the firms that supply their packaging and boxes. Why?

Correct AnswerverifiedMany manufacturers attempt to build fair...View AnswerShow Answer

If consumers find that there are substantial transactions costs to purchasing a product, then:

Correct AnswerverifiedShow Answer

In a competitive market, the firm has a difficult time capturing value due to the large number of rivals. But it can be successful at capturing value if the:

Correct AnswerverifiedShow Answer

The fast food industry from Back Yard Burgers to KFC promises good food delivered quickly. The value of the consumer's time:

Correct AnswerverifiedShow Answer

Putting together two goods - shaving cream and razors - to increase value is using the power of:

Correct AnswerverifiedShow Answer

Paul Romer argues that "what underlies this process [economic success] ...... are instructions, formulas, recipes, and methods of doing things." He is referring to the:

Correct AnswerverifiedShow Answer

In a corporation, one important source of value is that 'whole organization' is worth more than the sum of its parts. This is called:

Correct AnswerverifiedShow Answer

Draw supply and demand for a product showing the equilibrium price and quantity. Illustrate what would happen if all the transactions costs of market were reduced. Generally, what is the impact of transactions costs on the operation of the marketplace?

Correct Answerverified The dashed supply and demand curves ill...View AnswerShow Answer

What happens to producer surplus and consumer surplus if transactions costs are reduced?

Correct AnswerverifiedConsumer-borne transaction costs reduce ...View AnswerShow Answer

Since September 11, 2001, longer lines, longer airport waits, and limits on carry-on luggage have all contributed to:

Correct AnswerverifiedShow Answer

Besides barriers to entry, what are some of the other reasons for incumbents to maintain their profits.

Correct AnswerverifiedBesides barriers to entry, the...View AnswerShow Answer

Correct Answer
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Value is created when transactions costs...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Many manufacturers attempt to build fair...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The dashed supply and demand curves ill...
View Answer

Correct Answer
verified
Consumer-borne transaction costs reduce ...
View Answer

Correct Answer
verified

Correct Answer
verified
Besides barriers to entry, the...
View Answer