BE 301EXAM 2 QUESTIONS WITH VERIFIED
ANSWERS
What is the purpose of the production function and cost curves? - Answers - Reflect the
firm's efforts to rationalize production and minimize total economic costs, including a
charge for capital used in producing value.
What causes unit costs to fall over a range? - Answers - 1. Overheard/fixed costs
spread over more units
2. Increasing returns to variable input.
Why do unite costs eventually increase? - Answers - • Law of Diminishing Returns
• Opportunity cost on inputs rises at the margin
• Suppliers learn the success of your business
• Learning effects eventually level off.
What is value? - Answers - The result of successfully doing the job customers have
hired the firm to do for them.
What is the demand function? - Answers - A mathematical representation of the
relationship between the quantity demanded and all factors influencing demand:
What is the algebraic demand function? - Answers - Q = F(X1,X2,X3) Where Q is
quantity demanded and the Xis are the factors influencing demand.
What is the first law of demand? - Answers - All else equal, when the price of a good or
service decreases, the quantity of the good or service demanded by consumers will
increase.
According to the first law of demand, an increase in price causes the opportunity cost of
purchasing a good/service to what? Do consumers buy more or less of the good or
service? - Answers - The opportunity cost of purchasing the good or service increases.
So consumers buy less of the now more costly good or service.
What are the 3 MICRO-ECONOMIC factors that effect the demand curve? - Answers - •
Personal Incomes
• Price of Substitutes
• Price of complements
What are the 4 MANAGERIAL ECONOMIC factors that effect the demand curve? -
Answers - • Product
• Place
• Promotion
, • Profit
What is a value proposition? - Answers - A vector of features and benefits we believe
will appeal to customers and what they will prefer to our rival's value propositions.
What is a vector? - Answers - An array of data ordered so that certain items can be
located as a single index or subscript.
Budget hotels offer standard amenities to the price sensitive customer. What are some
of the vectors? - Answers - Eating facilities, Architectural aesthetics, Lounges, Room
size, Availability of receptionist, Furniture and amenities in room Bed quality, Hygiene,
Room quietness, and Price.
What is The Business Model? - Answers - Brief narrative about how the firm plans to
monetize (I.e., claim) the value created in the value proposition for the investors and
associates.
How does the business model work/steps? - Answers - o Listing the major characters
our narrative (story).
o How this cast of characters might be motivated to deal with us.
o A discussion of any plot twists that can make us more effective or efficient.
What is Traveler's Cheque? - Answers - Travelers were often used by individuals who
are traveling on vacation to foreign countries. They can be used in place of hard
currency in the Czech Republic. Travelers' Cheques were first introduced by American
Express back in 1891, when the president of American Express had difficulty cashing
personal checks in small European towns.
What is the value chain? - Answers - Visual representation of the value creating
activities people perform in economic organizations.
What are the value chain drivers? - Answers - cost drivers and value drivers
What are cost drivers? - Answers - Activities (including the use of labor, capital and
material inputs) that determine the relative cost position of the firm in its industry.
What are value drivers? - Answers - Activities that creates value for customers by
determining the position and elasticity of the demand function.
Who is the stakeholder with money/credit? - Answers - customers
Who is the stakeholder with capital/votes? - Answers - investors
Who is the stakeholder with skills & inputs? - Answers - associates
ANSWERS
What is the purpose of the production function and cost curves? - Answers - Reflect the
firm's efforts to rationalize production and minimize total economic costs, including a
charge for capital used in producing value.
What causes unit costs to fall over a range? - Answers - 1. Overheard/fixed costs
spread over more units
2. Increasing returns to variable input.
Why do unite costs eventually increase? - Answers - • Law of Diminishing Returns
• Opportunity cost on inputs rises at the margin
• Suppliers learn the success of your business
• Learning effects eventually level off.
What is value? - Answers - The result of successfully doing the job customers have
hired the firm to do for them.
What is the demand function? - Answers - A mathematical representation of the
relationship between the quantity demanded and all factors influencing demand:
What is the algebraic demand function? - Answers - Q = F(X1,X2,X3) Where Q is
quantity demanded and the Xis are the factors influencing demand.
What is the first law of demand? - Answers - All else equal, when the price of a good or
service decreases, the quantity of the good or service demanded by consumers will
increase.
According to the first law of demand, an increase in price causes the opportunity cost of
purchasing a good/service to what? Do consumers buy more or less of the good or
service? - Answers - The opportunity cost of purchasing the good or service increases.
So consumers buy less of the now more costly good or service.
What are the 3 MICRO-ECONOMIC factors that effect the demand curve? - Answers - •
Personal Incomes
• Price of Substitutes
• Price of complements
What are the 4 MANAGERIAL ECONOMIC factors that effect the demand curve? -
Answers - • Product
• Place
• Promotion
, • Profit
What is a value proposition? - Answers - A vector of features and benefits we believe
will appeal to customers and what they will prefer to our rival's value propositions.
What is a vector? - Answers - An array of data ordered so that certain items can be
located as a single index or subscript.
Budget hotels offer standard amenities to the price sensitive customer. What are some
of the vectors? - Answers - Eating facilities, Architectural aesthetics, Lounges, Room
size, Availability of receptionist, Furniture and amenities in room Bed quality, Hygiene,
Room quietness, and Price.
What is The Business Model? - Answers - Brief narrative about how the firm plans to
monetize (I.e., claim) the value created in the value proposition for the investors and
associates.
How does the business model work/steps? - Answers - o Listing the major characters
our narrative (story).
o How this cast of characters might be motivated to deal with us.
o A discussion of any plot twists that can make us more effective or efficient.
What is Traveler's Cheque? - Answers - Travelers were often used by individuals who
are traveling on vacation to foreign countries. They can be used in place of hard
currency in the Czech Republic. Travelers' Cheques were first introduced by American
Express back in 1891, when the president of American Express had difficulty cashing
personal checks in small European towns.
What is the value chain? - Answers - Visual representation of the value creating
activities people perform in economic organizations.
What are the value chain drivers? - Answers - cost drivers and value drivers
What are cost drivers? - Answers - Activities (including the use of labor, capital and
material inputs) that determine the relative cost position of the firm in its industry.
What are value drivers? - Answers - Activities that creates value for customers by
determining the position and elasticity of the demand function.
Who is the stakeholder with money/credit? - Answers - customers
Who is the stakeholder with capital/votes? - Answers - investors
Who is the stakeholder with skills & inputs? - Answers - associates
