BSAD 025 QUESTIONS AND ANSWERS
Calculating consumer surplus - Answers- (Top demand- Equilibrium number)*Q)/2
Producer Surplus - Answers- (Equilibrium-bottom WTA)*Q)/2
Total Value Created - Answers- (Consumer +Producer)
Change in WTA - Answers- affects supply and equilibrium quantity
Value created equations - Answers- willingness to pay- Willingness to accept= Value
Created
Total WTP - Total Revenue + Total Profit= value created
Total Consumer Surplus + Total Revenue - Total Cost= value created
(Willingness to Pay per unit - minus Cost per unit) * units sold= Value created
Accounting profit - Answers- revenue-expenses explicit
Return on assets - Answers- (accounting profit/asset value)*100
Expected Profit - Answers- Asset*interest rate
Economic Profit - Answers- Revenue-explicit+implicit costs
or profit-asset return
Which firms are likely able to make a profit why? - Answers- Those who are able to
most effectively implement their strategy and be a leader in either benefits or costs.
Those who are able to maximize economic profit.
Why do potential Buyers and sellers stay out of the market in the short term - Answers-
-Inefficient buyers and sellers will not engage originally. If a seller is above the
equilibrium they may stay out because they are too high, in addition buyers who are
below the equilibrium price will also stay out.
-On the right of the line after equilibrium
-Decreased willingness to accept would make your product efficient
-Increase your willingness to pay would make your product efficient
If a company breaks even from an accounting perspective, is the owner of the company
earning an economic profit and why? - Answers- No! Value created is 0 at equilibrium
point, because WTP=WTA
No, because economic profit is Revenue- (explicit +implicit costs) → profit-expected
, accounting profit is just explicit costs
the costs would be greater than accounting and make the negative margin larger
How does one assess if a company is performing successfully in the Foundation
Simulation? - Answers- In assessing the performance of a company first and foremost
looking at profits and cumulative profits other important indicators are:
Return on Sales (ROS) = Net income/sales
Return on Assets (ROA)= Net income/assets
Contribution margin= revenue-variable costs
Return on sales - Answers- Net income/sales
return on assets - Answers- net income/assets
contribution margin - Answers- revenue-variable costs
Is the process of assessing annual performance in the simulation generally consistent
with that used to compare the performance of multiple companies operating within a
single industry? - Answers- Yes, because the companies are all public therefore you
can see how everyones costs and profits compare to see where you stand.
Is the level of financial detail presented in FastTrack representative of that available
within most industries? - Answers- Yes, the information we have is companies annual
reports
Is the level of product performance presented in FastTrack and the company Annual
Reports representative of that available within most industries? - Answers- Yes, in fact
we are getting more information because we know the growth rate and exactly what
customers want.
Is the level of market (segment demand, growth, customer desires, etc.) detail
presented in FastTrack representative of that available within most industries? -
Answers- We are getting more, we know how much a company is growing year to year!
Does a firm have to be the most profitable to have a competitive advantage in its
industry? - Answers- Not necessarily, a competitive advantage is created when the firm
creates more value for their consumers than someone else either by price or benefits.
Most profitable is a competitive advantage
Why does a firm care about consumer surplus? - Answers- -A firm cares about
consumer surplus because they want to create value for the customer at the lowest cost
possible. If they create more value than competitors they have created a competitive
advantage.
-A firm in a competitive market can earn profit only if it creates more value than its rivals
Calculating consumer surplus - Answers- (Top demand- Equilibrium number)*Q)/2
Producer Surplus - Answers- (Equilibrium-bottom WTA)*Q)/2
Total Value Created - Answers- (Consumer +Producer)
Change in WTA - Answers- affects supply and equilibrium quantity
Value created equations - Answers- willingness to pay- Willingness to accept= Value
Created
Total WTP - Total Revenue + Total Profit= value created
Total Consumer Surplus + Total Revenue - Total Cost= value created
(Willingness to Pay per unit - minus Cost per unit) * units sold= Value created
Accounting profit - Answers- revenue-expenses explicit
Return on assets - Answers- (accounting profit/asset value)*100
Expected Profit - Answers- Asset*interest rate
Economic Profit - Answers- Revenue-explicit+implicit costs
or profit-asset return
Which firms are likely able to make a profit why? - Answers- Those who are able to
most effectively implement their strategy and be a leader in either benefits or costs.
Those who are able to maximize economic profit.
Why do potential Buyers and sellers stay out of the market in the short term - Answers-
-Inefficient buyers and sellers will not engage originally. If a seller is above the
equilibrium they may stay out because they are too high, in addition buyers who are
below the equilibrium price will also stay out.
-On the right of the line after equilibrium
-Decreased willingness to accept would make your product efficient
-Increase your willingness to pay would make your product efficient
If a company breaks even from an accounting perspective, is the owner of the company
earning an economic profit and why? - Answers- No! Value created is 0 at equilibrium
point, because WTP=WTA
No, because economic profit is Revenue- (explicit +implicit costs) → profit-expected
, accounting profit is just explicit costs
the costs would be greater than accounting and make the negative margin larger
How does one assess if a company is performing successfully in the Foundation
Simulation? - Answers- In assessing the performance of a company first and foremost
looking at profits and cumulative profits other important indicators are:
Return on Sales (ROS) = Net income/sales
Return on Assets (ROA)= Net income/assets
Contribution margin= revenue-variable costs
Return on sales - Answers- Net income/sales
return on assets - Answers- net income/assets
contribution margin - Answers- revenue-variable costs
Is the process of assessing annual performance in the simulation generally consistent
with that used to compare the performance of multiple companies operating within a
single industry? - Answers- Yes, because the companies are all public therefore you
can see how everyones costs and profits compare to see where you stand.
Is the level of financial detail presented in FastTrack representative of that available
within most industries? - Answers- Yes, the information we have is companies annual
reports
Is the level of product performance presented in FastTrack and the company Annual
Reports representative of that available within most industries? - Answers- Yes, in fact
we are getting more information because we know the growth rate and exactly what
customers want.
Is the level of market (segment demand, growth, customer desires, etc.) detail
presented in FastTrack representative of that available within most industries? -
Answers- We are getting more, we know how much a company is growing year to year!
Does a firm have to be the most profitable to have a competitive advantage in its
industry? - Answers- Not necessarily, a competitive advantage is created when the firm
creates more value for their consumers than someone else either by price or benefits.
Most profitable is a competitive advantage
Why does a firm care about consumer surplus? - Answers- -A firm cares about
consumer surplus because they want to create value for the customer at the lowest cost
possible. If they create more value than competitors they have created a competitive
advantage.
-A firm in a competitive market can earn profit only if it creates more value than its rivals
