Business Strategy
Solved Exam Questions
Course Introduction
Business Strategy is a comprehensive course that explores the frameworks, tools, and analytical approaches that organizations use to gain a sustainable competitive advantage in their markets. Students will examine how internal and external environments shape strategic decision-making, learning to assess industry dynamics, evaluate resources and capabilities, and anticipate competitors moves. Through case studies, group projects, and simulations, the course emphasizes the formulation, implementation, and evaluation of business strategies in diverse organizational contexts, preparing students to think critically and act decisively as future business leaders.
Recommended Textbook
Managerial Economics and Business Strategy 7th Edition by Michael R. Baye
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14 Chapters
1912 Verified Questions
1912 Flashcards
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Page 2
Chapter 1: The Fundamentals of Managerial Economics
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Suppose total benefits and total costs are given by B(Y) = 150Y - 10Y<sup>2</sup> and C(Y) = 5Y<sup>2</sup>.Then marginal costs are:
A)2.5Y.
B)25Y.
C)5Y.
D)10Y.
Answer: D
Q2) What is the total cost associated with producing eight units of the control variable, Q (identify point B in the above table)?
A)3,000.
B)3,600.
C)3,800.
D)4,200. Answer: B
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Chapter 2: Market Forces: Demand and Supply
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Given a linear supply function of the form Q<sub>X</sub><sup>S</sup> = 3,000 + 3P<sub>X</sub> - 2P<sub>r</sub> - P<sub>w</sub>, find the inverse linear supply function assuming P<sub>r</sub> = $1,000 and P<sub>w</sub> = $100.
A)Q<sub>X</sub><sup>S</sup> = 900 + 3P<sub>X</sub>.
B)P<sub>X</sub> = 300 + 0.3333Q<sub>X</sub>.
C)P<sub>X</sub> = -300 + 0.3333Q<sub>X</sub>.
D)P<sub>X</sub> = 2,900 + 3P<sub>X</sub>.
Answer: C
Q2) Consider a market characterized by the following inverse demand and supply functions: P<sub>X</sub> = 10 - 2Q<sub>X</sub> and P<sub>X</sub> = 2 + 2Q<sub>X</sub><sub>.</sub> Compute the surplus consumers receive when an $8 per unit price floor is imposed on the market.
A)$0.
B)$1.
C)$3.
D)$5.
Answer: B
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Chapter 3: Quantitative Demand Analysis
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Which of the following provides a measure of the overall fit of a regression?
A)t-statistic.
B)F-statistic.
C)p-value.
D)the t-statistic and the p-value.
Answer: B
Q2) Since most consumers spend very little on salt, a small increase in the price of salt will
A)reduce quantity demanded by a large amount.
B)not reduce quantity demanded by very much.
C)not change quantity demanded.
D)increase quantity demanded by a small amount.
Answer: B
Q3) When marginal revenue is positive for a linear (inverse) demand function, decreases in output will cause total revenues to A)increase.
B)decrease.
C)remain unchanged.
D)there is not sufficient information to classify the elasticity of demand.
Answer: B
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Chapter 4: The Theory of Individual Behavior
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174 Flashcards
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Sample Questions
Q1) The horizontal intercept of the budget line is:
A)-P<sub>X</sub>/P<sub>Y.</sub>
B)M/P<sub>X</sub><sub>.</sub>
C)M/P<sub>Y.</sub>
D)P<sub>Y</sub>Y.
Q2) If you include in your offerings some inferior goods, the demand for these products will increase
A)during bad economic times.
B)during economic booms.
C)when incomes are high.
D)all of the statements associated with this question are correct.
Q3) Some individuals choose to undertake risky prospects while others choose safer ones, because they have different
A)degrees of transitivity.
B)marginal rates of substitution between risk and reward.
C)income elasticities.
D)marginal utilities.
Q4) Draw the opportunity set of a consumer with an income of $200 who faces prices of
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Chapter 5: The Production Process and Costs
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178 Flashcards
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Sample Questions
Q1) For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MP<sub>K</sub> is:
A)16.
B)5.2.
C)3.8.
D)12.
Q2) Suppose the long-run average cost curve is U-shaped.When LRAC is in the increasing stage, there exist
A)economies of scope.
B)diseconomies of scope.
C)economies of scale.
D)diseconomies of scale.
Q3) Variable factors of production are the inputs that a manager
A)may adjust in order to alter sales.
B)may adjust in order to alter production.
C)cannot adjust in the short-run.
D)cannot adjust in the long-run.
Q4) Your firm produces two products, Q<sub>1</sub> and Q<sub>2</sub>.An economic consulting firm has estimated your cost function to be
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Chapter 6: The Organization of the Firm
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which of the following is an outside incentive that forces managers to put forth maximal effort?
A)revenue sharing contracts.
B)performance bonuses.
C)threat of takeovers.
D)flat fees.
Q2) Suppose that the marginal benefit of writing a contract is $100 and the marginal cost of that contract is $100.Based on this information, the optimal contract length should be
A)increased by half.
B)increased by two-thirds.
C)decreased.
D)held constant at the contract length where MB = 100 and MC = 100.
Q3) If a firm manager has a base salary of $100,000 and also receive 5% of all profits, what percentage of his/her final income will be from the profit sharing plan given profit equals $1,500,000?
A)51%.
B)27%.
C)43%.
D)48%.
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Chapter 7: The Nature of Industry
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117 Flashcards
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Sample Questions
Q1) Suppose each of the 50 states had only one gasoline station -- each of the same size.The four-firm concentration ratio for the state of New York, based on the state data, is:
A)1.0.
B)0.08.
C)0.32.
D)0.16.
Q2) Which of the following is NOT considered a measure of firm conduct?
A)Lerner index of pricing behavior.
B)Research and development measures.
C)Advertising measures.
D)Dansby-Willig index.
Q3) Which of the following may transform an industry from oligopoly to monopolistic competition?
A)Entry of new firms.
B)Significant vertical integration.
C)Exit of firms.
D)A series of horizontal mergers.
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9
Chapter 8: Managing
in Competitive, Monopolistic, and Monopolistically Competitive Markets
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138 Verified Questions
138 Flashcards
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Sample Questions
Q1) What will likely happen to the demand for the patent-holder's product when the patent runs out?
A)Demand will increase.
B)Demand will decline.
C)Nothing.
D)None of the statements associated with this question are correct.
Q2) You are the manager of a firm that sells its product in a competitive market at a price of $40.Your firm's cost function is C = 60 + 4Q<sup>2</sup>.Your firm's maximum profits are
A)36.
B)60.
C)40.
D)80.
Q3) You are the manager of a firm that sells its product in a competitive market at a price of $48.Your firm's cost function is C = 60 + 2Q<sup>2</sup>.Your firm's maximum profits are
A)$192.
B)$228.
C)$348.
D)$576.
Page 10
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Chapter 9: Basic Oligopoly Models
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125 Flashcards
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Sample Questions
Q1) Firm one and firm two compete as a Cournot oligopoly.There is an increase in marginal cost for firm one.Which of the following is not true?
A)Firm one will produce less.
B)Firm two will produce more.
C)Both firm one's and firm two's reaction functions are shifted.
D)Profits of firm one will decrease.
Q2) Which of the following is not a quantity-setting oligopoly model?
A)Stackelberg.
B)Cournot.
C)Bertrand.
D)All of the choices are quantity setting models.
Q3) The inverse demand curve for a Stackelberg duopoly is
Q4) You are the CEO of ClipIt, a paper clip manufacturer.Your company enjoys a patented technology that allows it to produce paper clips faster and at a lower cost than your only rival, FastenIt.Clipit uses this advantage to be the first to choose its profit-maximizing output level in the market.The inverse demand function for paper clips is
Q5) What real-world evidence would lead you to believe that firms were acting as Cournot oligopolists? Stackelberg oligopolists? Bertrand oligopolists?
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Chapter 10: Game Theory: Inside Oligopoly
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) You are the bargaining coordinator for Sun Car Manufacturers.At present you are renegotiating the labor contract with the union representative.You are bargaining over an expected 20 percent increase in earnings over the next three-year contract period.You are trying to decide whether to offer one-third, one-half, or all of the increase in earnings to the union.The union rules are such that all contracts must be voted on.The additional earnings are contingent on getting started on the new contract next week.If an agreement isn't reached on the first round of negotiations, the firm will go out of business.The union representative tells you that if you do not give the union all of the additional profits, the union members will not vote for the agreement.
a.Show the extensive form of this game.
b.What will you offer the union? Why?
Q2) What is the maximum interest rate that can sustain collusion?
A)66.7%.
B)33%.
C)25%.
D)15%.
Q3) According to various trade publications, over 200,000 changes are made in airfares each day.Why do you think this is the case?
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Chapter 11: Pricing Strategies for Firms With Market Power
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) A local video store estimates their average customer's demand per year is Q = 7 - 2P, and knows the marginal cost of each rental is $0.5.How much should the store charge for each rental if it engages in optimal two-part pricing?
A)$0.35.
B)$0.5.
C)$0.7.
D)$1.00.
Q2) You are the manager of a Mom and Pop store that can buy milk from a supplier at $2.00 per gallon.If you believe the elasticity of demand for milk by customers at your store is -3, then your profit-maximizing price is A)$1.33.
B)$2.75.
C)$3.00.
D)$4.50.
Q3) You run a golf course at a tourist resort.At your resort, there are two distinct groups of players.One group owns property at the resort and resides there most of the year.On average, each of these consumers has a monthly inverse demand for golf services of
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Page 13
Chapter 12: The Economics of Information
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) Determine the most likely information structure (independent private values, affiliated values, or common values) for an auction involving:
a.A music CD.
b.An offshore oil lease.
c.A used car.
Q2) A consumer's reservation price is the price at which a
A)consumer prefers to search than purchasing at the lowest observed price.
B)consumer prefers to purchase at the lowest observed price than to engage in another search.
C)consumer is indifferent between searching again and purchasing at the lowest observed price.
D)producer is indifferent between selling the product and not selling the product.
Q3) The expected value of project A is
A)$5.
B)$10.
C)$20.
D)none of the statements associated with this question are correct.
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Chapter 13: Advanced Topics in Business Strategy
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74 Verified Questions
74 Flashcards
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Sample Questions
Q1) A two-way network linking 9 users creates how many potential network connections?
A)72.
B)56.
C)90.
D)18.
Q2) In general, adding one more user to a two-way network tends to
A)benefit the new user more than the existing users.
B)benefit existing users more than the new user.
C)provide equal benefits to existing users and the new user.
D)does not provide any benefit to either new or existing users.
Q3) Firms that can effectively price discriminate will increase profitability when they engage in
A)predatory pricing.
B)limit pricing.
C)strategies that raises rivals' costs.
D)any of the statements associated with this question are correct.
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Chapter 14: A Managers Guide to Government in the Marketplace
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) What is the domestic quantity supplied at the domestic market price?
A)22,000.
B)10,000.
C)52,000.
D)30,000.
Q2) The manager of Roy's Video noticed a newspaper advertisement by a rival store that erroneously claimed, "We are the only firm in town that does not sell pornographic videos." He initially dismissed the deceptive advertisement but decided to reconsider his course of action when the rival refused to stop running the advertisement.In the interim, numerous churches and other organizations boycotted Roy's Video, resulting in an estimated loss of $25,000.Do you think it would be advisable for Roy to seek legal counsel? Explain.
Q3) The external marginal cost of producing coal is MC<sub>external</sub> = 6Q while the internal marginal cost is MC<sub>internal</sub> = 4Q.The inverse demand for coal is given by P = 120 - 2Q.What is the socially efficient level of output?
A)10.
B)20.
C)15.
D)8.
Page 16
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