BE 301 EXAM 3 | 211 QUESTIONS | WITH COMPLETE
SOLUTIONS.
A competitive firm can earn positive or negative profit in the short run until
entry or exit occurs. In the long run, competitive firms are condemned?
a)To shut down their operations as price falls to below breakeven price.
b)To make an early appearance in bankruptcy court
c)To earn only an average rate of return
d)To earn a negative economic value added (EVA). Answer - ANS. C
To earn only an average rate of return
Above-normal profit in open markets is often a temporary phenomenon as this
profit attracts capital investments by rivals and new entrants until profits fall
back to normal returns. This statement is: Answer - TRUE
Monopoly firms can earn positive profit for a longer period of time than
competitive firms, but entry and imitation eventually:
a)Erode their profit as well
b)Cause their industry to become perfectly competitive
c)Lead to price wars
,d)Produce a Nash Equilibrium. Answer - Ans: A
Erode their profit as well
The field of economics dealing with the strategic behavior of firms, regulatory
policy, antitrust policy and market competition is known as:
a) Public choice theory
b) Microeconomic theory
c) Applied economic analysis
d) Industrial organization economics. Answer - Ans: D
Industrial Organization Economics
Industrial organization economics (the "external" view) explains mean
reversion and the indifference principle in terms of:
a)The zero-profit equilibrium
b)The operation the five forces of competition
c)The interaction of supply and demand
d)Marginal analysis. Answer - Ans: B
The operation the five forces of competition
Many sellers in an industry, few barriers to entry, and high levels of value
differentiation are the conditions that characterize:
a) Perfect competition
,b) Monopolistic competition
c) Oligopoly
d) Monopoly. Answer - And: B
Monopolistic Competition
The ability of assets to move from lower- to higher-valued uses is the force that
moves an industry toward long-run equilibrium. That is, owners of mobile
assets will make the same profit no matter where it goes. We call this
phenomenon:
a) The Paradigm Effect
b) Equilibration
c) Parkinson's Law
d) The Indifference Principle. Answer - ANS. D.
The Indifference Principle
In the great game of business, both producers and consumers accept the fact
that in policy, "You win some; lose some." The result is that markets tend to
oscillate between competitive parity and
a) Temporary competitive advantage
b) Sustained competitive advantage
c) Normal returns
d) Zero economic value added. Answer - ANS. B
sustained competitive advantage
, To manage the Paradigm Effect, effective executives must first:
a) Accept the Fact of Cognitive Biases.
b) Scan the environment for opportunities
c) Hire one or two "paradigm shifters"
d) Attend a seminar on Behavioral Economics. Answer - ANS. A
Accept the fact of Cognitive Biases
Recognizing and identifying the significant, emerging trends in the external
context (opportunities and threats) and understanding how changes in the
external context may affect the firm's strategic actions, and raising the
organization's consciousness of the importance of considering adjustments to
theory of the business are:
a) The goals of the paradigm audit
b) The objectives of evaluating the firm's strengths and weaknesses
c) The objectives of external context analysis
d) The goals of managing in group settings. Answer - ANS. C.
The objectives of external context analysis
People who create new paradigms (paradigm shifters) tend to be outsiders
(i.e., new rules are written on the edge). For someone identified with an
existing paradigm to embrace a new paradigm takes:
a) Courage
SOLUTIONS.
A competitive firm can earn positive or negative profit in the short run until
entry or exit occurs. In the long run, competitive firms are condemned?
a)To shut down their operations as price falls to below breakeven price.
b)To make an early appearance in bankruptcy court
c)To earn only an average rate of return
d)To earn a negative economic value added (EVA). Answer - ANS. C
To earn only an average rate of return
Above-normal profit in open markets is often a temporary phenomenon as this
profit attracts capital investments by rivals and new entrants until profits fall
back to normal returns. This statement is: Answer - TRUE
Monopoly firms can earn positive profit for a longer period of time than
competitive firms, but entry and imitation eventually:
a)Erode their profit as well
b)Cause their industry to become perfectly competitive
c)Lead to price wars
,d)Produce a Nash Equilibrium. Answer - Ans: A
Erode their profit as well
The field of economics dealing with the strategic behavior of firms, regulatory
policy, antitrust policy and market competition is known as:
a) Public choice theory
b) Microeconomic theory
c) Applied economic analysis
d) Industrial organization economics. Answer - Ans: D
Industrial Organization Economics
Industrial organization economics (the "external" view) explains mean
reversion and the indifference principle in terms of:
a)The zero-profit equilibrium
b)The operation the five forces of competition
c)The interaction of supply and demand
d)Marginal analysis. Answer - Ans: B
The operation the five forces of competition
Many sellers in an industry, few barriers to entry, and high levels of value
differentiation are the conditions that characterize:
a) Perfect competition
,b) Monopolistic competition
c) Oligopoly
d) Monopoly. Answer - And: B
Monopolistic Competition
The ability of assets to move from lower- to higher-valued uses is the force that
moves an industry toward long-run equilibrium. That is, owners of mobile
assets will make the same profit no matter where it goes. We call this
phenomenon:
a) The Paradigm Effect
b) Equilibration
c) Parkinson's Law
d) The Indifference Principle. Answer - ANS. D.
The Indifference Principle
In the great game of business, both producers and consumers accept the fact
that in policy, "You win some; lose some." The result is that markets tend to
oscillate between competitive parity and
a) Temporary competitive advantage
b) Sustained competitive advantage
c) Normal returns
d) Zero economic value added. Answer - ANS. B
sustained competitive advantage
, To manage the Paradigm Effect, effective executives must first:
a) Accept the Fact of Cognitive Biases.
b) Scan the environment for opportunities
c) Hire one or two "paradigm shifters"
d) Attend a seminar on Behavioral Economics. Answer - ANS. A
Accept the fact of Cognitive Biases
Recognizing and identifying the significant, emerging trends in the external
context (opportunities and threats) and understanding how changes in the
external context may affect the firm's strategic actions, and raising the
organization's consciousness of the importance of considering adjustments to
theory of the business are:
a) The goals of the paradigm audit
b) The objectives of evaluating the firm's strengths and weaknesses
c) The objectives of external context analysis
d) The goals of managing in group settings. Answer - ANS. C.
The objectives of external context analysis
People who create new paradigms (paradigm shifters) tend to be outsiders
(i.e., new rules are written on the edge). For someone identified with an
existing paradigm to embrace a new paradigm takes:
a) Courage
