Managerial Economics Exam 3 with 100% Correct Answers 2023

improving industry attractiveness - Correct answer-reduce number of rivals restricting entry cooperation among rivals oligopoly - Correct answer-a few large, influential rivals high competitive interdependence market power and complex pricing high barriers to entry both commodities and differentiated goods/services economies of scale - Correct answer-reduction of unit costs with quantity of output due to greater specialization of labor and management, greater bargaining power over suppliers, more efficient utilization of capital equipment, etc. Rent Seeking - Correct answer-incumbents seek to use the force of government to create a barrier to the entry of new firms, or to hobble new entrants before they can get established the private trust or cartel - Correct answer-a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, reduce production, or exclude entry of a new competitor into their market monopolistic trusts - Correct answer-oligopolistic firms attempt to act like a "collective" pure monopoly, trusts involve small numbers of major players, mutually interdependent and prefer to avoid cutthroat rivalry, agree explicitly to refrain from competition factors exacerbating cartel instability - Correct answer-1. falling demand may create tension among market rivals 2. any entry into the oligopolistic industry puts downward pressure on price 3. disruptive technologies emerge to end cooperation 4. managers are paid for sustainable competitive 5. it's human nature to want to be number one 6. even rational people may face incentives to compete where cooperation would be more beneficial neoclassical school - Correct answer-on oligopolistic rivalry: competition exists where there is a large number of buyers and sellers dealing in homogeneous goods and services and where entry and exit are easy and information flows freely SCA = F(Position, Barriers to Entry) austrian school - Correct answer-on oligopolistic rivalry: competition is a process by which two or more parties attempt to gain the more favorable terms SCA = F(Core Competencies) Austrian Rivalry Sisyphus problem - Correct answer-firms competing in oligopolistic industries tend to experience times of above normal returns, and times of normal returns, or worse like sisyphus, they roll their rock up the hill only to have it roll back down again and again The Waving Hand Equilibrium - Correct answer--top firms in oligopoly industries may continue to jockey for position through time -the back-and-forth cycle of leadership and followership -two firms in oligopolistic industry attempt over time to gain a competitive advantage over their rival -neither firm is able to find a dominant strategy neither firm has unique, strategic resources to give them a sustainable competitive advantage game theory - Correct answer-the study of strategic or interactive decisions making which entails mathematical models of conflict and cooperation between intelligent rational decision-makes dominant strategy - Correct answer-in game theory, when one strategy is better than another strategy for one player, no matter how that player's opponents may play, that's the dominant strategy for that player the resource-based view - Correct answer--internal focus on resources and capabilities rather than external focus on rivals -sustainable competitive advantage derives from formulation and implementation of strategies supported by strategic resources and capabilities Value - Correct answer--in the VRIN/O framework, pertains to a resource or capability that enables the firm controlling it to implement a value-creating strategy to achieve a competitive advantage and above-normal returns -value is a low bar for SCA: all existing firms have resources or capabilities that enable it to survive and, thus, have value Rareness - Correct answer--resources that can only be acquired by one or very few companies are considered to be rare -this characteristic of resources and capabilities impedes the ability of imitating firm to recognize, acknowledge, or respond to your resource-based success differential scarcity and rents - Correct answer--assume resources are valuable but heterogeneous (research scientists) -as demand rises, the valuable and differentially rare resources will become scarce -now, less valuable resources will come online -the rents earned by the superior resources are differential rents product/service pioneers - Correct answer-the first firm to develop a working model or sample in a new product category. what is rare is the ability and willingness to invest the time and capital and bear the risks of entrepreneurial discovery market pioneers - Correct answer-the first firm to sell goods and services in a new market setting. what is rare is the willingness to enter a new market, deal with language and culture difficulties, and the risks of exchange rate fluctuations inimitability - Correct answer-resources and capabilities that prevent potential new entrants form recognizing, acknowledging, or responding to your competitive advantage and success in real time paths to inimitability - Correct answer--values, attitudes and beliefs -historical conditions -causal ambiguity -social complexity values, attitudes and beliefs - Correct answer-psychological resources and capabilities possessed by key employees that others are unwilling or unable to adopt historical conditions - Correct answer-resources that were developed due to historical events or over a long period of time are usually costly to imitate causal ambiguity - Correct answer-companies can't identify the particular resources that are the cause of competitive advantage social complexity - Correct answer-the resources and capabilities that are based on company's culture or interpersonal relationships distinctive, difficult to hold to values, attitudes, and beliefs - Correct answer-the ability and willingness to do valuable things that others are unable and/or unwilling to do may be valuable, rare and inimitable, and a source of SCA time on sustainable competitive advantage - Correct answer-competitive advantage is most likely to result from the development and use of resources and capabilities that have been built up through on ongoing process of accumulation over historical time entropy and on-going investment - Correct answer--human organizations have a tendency to run down over time -their resources and capabilities can lose their original effect on sustainable competitive advantage -they experience what physicists have identified in nature as entropy: lack of order or predictability; gradual decline into disorder investment delays entropy - Correct answer--if your goal is just to maintain your business, you are actually liquidating it -to avoid organizational entropy, there must be a continuing effort for improvement to even maintain the status quo ante causal ambiguity - Correct answer-exists when a potential imitating firm does not and cannot understand how the resources or capabilities of an innovative firm help it achieve its competitive advantage in real time factors contributing to ambiguity - Correct answer--taken-for-granted resources or capabilities -complex sets of inter-related capabilities -multiple non-testable hypotheses about why the firm has been success taken for granted resources and capabilities - Correct answer--resources and capabilities are often complex and interdependent. they can be implicit and take for granted by the firm's managers -as such, there is no way to test any given resource to determine its effect on the firm's performance -Ristorante Babbo, Koch Industries and Rational Combi Steamer Oven Co. provide three examples unambiguous social complexity - Correct answer--socially complex systems are comprised of many elements that must be coordinated by management and/or which require spontaneous cooperation to produce sustainable competitive advantage -imitating firms will eventually recognize, acknowledge, and respond to these resources and capabilities, but not in real time team production is socially complex - Correct answer--interdependencies among associates increase advantage beyond the sum of the parts (synergy) -luck or foresight may endow firms with unique team production capabilities -rivals may be unable to pinpoint source of advantage and unable to capture equivalent value strategic substitutes - Correct answer-resources or capabilities that serve to neutralize a competitors previously effective barrier to imitation distinctive values, attitudes, and beliefs - Correct answer-the ability and willingness to do valuable things that others are unable and/or unwilling to do may be valuable, rare and inimitable, and a source of SCA entropy - Correct answer-lack of order or predictability; gradual decline into disorder on-going investment - Correct answer--human organizations have a tendency to run down over time