Competitive Strategy
Mock Exam
Course Introduction
Competitive Strategy explores the concepts, frameworks, and analytical tools essential for understanding how organizations achieve and sustain a competitive advantage in dynamic markets. Students will learn to analyze industry structures, assess competitors, evaluate firm resources, and formulate effective strategies using real-world case studies. The course combines foundational theories with practical applications, covering topics such as cost leadership, differentiation, innovation, strategic positioning, and responses to changing competitive environments. Through group projects and simulations, participants will develop the skills to craft and implement strategies that drive long-term business success.
Recommended Textbook
Managerial Economics and Business Strategy 9th Edition by Michael Baye
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14 Chapters
2024 Verified Questions
2024 Flashcards
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Page 2
Chapter 1: The Fundamentals of Managerial Economics
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) The first-order condition for maximizing net benefits is:
A) dB/dQ = 0.
B) dN/dQ = 0.
C) d<sup>2</sup>N/dQ<sup>2</sup> = 0.
D) dC/dQ = 0.
Answer: B
Q2) Suppose total benefits and total costs are given by B(Y)= 600Y 12Y<sup>2</sup> and C(Y)= 20Y<sup>2</sup>.What is the maximum level of net benefits?
A) 2,500.75
B) 2,812.5
C) 1916.4
D) None of the statements associated with this question are correct.
Answer: B
Q3) When MB = 300 12Y and TC = 12Y + 108,the optimal level of Y is:
A) 25.
B) 4.5.
C) 8.
D) 24.
Answer: D
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Page 3
Chapter 2: Market Forces: Demand and Supply
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) The demand for your product has been estimated to be Q<sup>d</sup><sub>x</sub> = 7,880 - 4P<sub>x</sub> - 2P<sub>y</sub> + P<sub>z</sub> - 0.1M.The relevant price and income data are as follows: P<sub>x</sub> = 10,P<sub>y</sub> = 15,P<sub>z</sub> = 50,M = 40,000.
a.Which goods are substitutes for X? Which are complements?
b.Is X an inferior or a normal good?
c.How much X will be purchased?
d.Graph the demand curve for X given the above information.
e.How will the demand curve change if M falls to 35,000?
Answer: a.Z is a substitute for X,while Y is a complement for X.
b.X is an inferior good.
c.Q<sup>d</sup><sub>x</sub> = 7,880 - 4(10)- 2(15)+ 50 - 0.1(40,000)= 3,860.
d.See the figure below.
e.The demand curve will shift out by 500. 11ea74ce_38bd_81b1_8fdc_c344c75ba2b6_TB2581_00
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4
Chapter 3: Quantitative Demand Analysis
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167 Flashcards
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Sample Questions
Q1) The demand for food (a broad group)is more:
A) elastic than the demand for beef (specific commodity).
B) inelastic than the demand for beef (specific commodity).
C) sensitive to price changes than the demand for beef.
D) responsive to price changes than the demand for beef.
Answer: B
Q2) Which of the following is NOT an important factor that affects the magnitude of the own price elasticity of a good?
A) Available substitutes
B) Supply of the good
C) Time
D) Expenditure share
Answer: B
Q3) A consumer spends all of her income on only one good.What is the income elasticity of demand for this good?
What is the own price elasticity of demand for this good?
Answer: Since PQ = M,we can solve for the demand function as Q = M/P.Taking logarithms,we see that ln Q = ln M ln P.Thus,the income elasticity is 1,and the own price elasticity is 1.
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Page 5
Chapter 4: The Theory of Individual Behavior
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) If you are in the business of selling chicken and the price of chicken and the price of beef both were to drop dramatically,what should you do with your inventory level of chicken?
A) Keep it the same.
B) Decrease the inventory.
C) Increase the inventory.
D) Get into the beef business.
Q2) Suppose an individual's marginal rate of substitution is three slices of pizza for one beer at the present bundle of beer and pizza she is consuming.If the price of beer is $1.00 and the price of a slice of pizza is $1.50,is the consumer maximizing her welfare? If not,how should she change her consumption?
Q3) Sam Voter prefers Jack to Rob,Rob to Mark,and Jack to Mark.Sam's preferences:
A) are not consistent with our assumptions about consumer behavior.
B) indicate that he is a liberal.
C) are not complete.
D) are transitive.
Q4) Sally Consumer's indifference curve between cigarettes and hamburgers is upward sloping.Based on this information,can we conclude that Sally views cigarettes as "bads" and hamburgers as "goods"?
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Chapter 5: The Production Process and Costs
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Sample Questions
Q1) Suppose the marginal product of labor is 10 and the marginal product of capital is 8.If the wage rate is $5 and the price of capital is $2,then in order to minimize costs the firm should use:
A) more capital and less labor.
B) more labor and less capital.
C) equal amounts of labor and capital.
D) None of the preceding statements is correct.
Q2) The long run is defined as:
A) the horizon in which the manager can adjust all factors of production.
B) the horizon in which there are only fixed factors of production.
C) the horizon in which there are both fixed and variable factors of production.
D) greater than one year.
Q3) Suppose the production function is given by Q = 3K + 4L.What is the average product of capital when 5 units of capital and 10 units of labor are employed?
A) 3
B) 4
C) 11
D) 45
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Chapter 6: The Organization of the Firm
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157 Flashcards
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Sample Questions
Q1) The threat of a corporate takeover is an _________ incentive that helps to mitigate the _________ principal-agent problem.
A) internal; manager-worker
B) internal; manager-consumer
C) external; owner-manager
D) external; owner-consumer
Q2) Suppose a firm manager has a base salary of $175,000 and earns 0.5 percent of all profits.Determine the manager's income if revenues are $10,000,000 and profits are $5,000,000.
A) $150,000
B) $200,000
C) $225,000
D) $300,000
Q3) When the owner runs the business:
A) he does not bear the full cost of a bad decision.
B) there is not a principal-agent problem.
C) he does not receive the full benefit nor the full cost of any decision.
D) he has only limited liability for the actions of the business.
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Chapter 7: The Nature of Industry
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Sample Questions
Q1) In perfect competition,which is NOT true?
A) Both concentration ratios and Rothschild indexes tend to be close to zero.
B) There are a large number of firms, and each is small relative to the entire market.
C) At least one firm has a perceptible impact on the market price.
D) Firms produce homogenous goods.
Q2) Which of the following measures market structure?
A) Four-firm concentration ratio
B) Lerner index
C) Herfindahl-Hirschman index
D) All of the choices may be used to make inferences about market structure.
Q3) The industry elasticity of demand for gadgets is 2,while the elasticity of demand for an individual gadget manufacturer's product is 10.Based on the Rothschild approach to measuring market power,we conclude that:
A) the Herfindahl index for this industry is 5.
B) the Herfindahl index for this industry is 0.2.
C) there is no monopoly power in this industry.
D) there is significant monopoly power in this industry.
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Page 9
Chapter 8: Managing in Competitive, Monopolistic, and
Monopolistically
Competitive Markets
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147 Verified Questions
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Sample Questions
Q1) Suppose perfectly competitive market conditions are characterized by the following inverse demand and inverse supply functions: P = 100 5Q and P = 10 + 5Q.The demand curve facing an individual firm operating in this market is:
A) P = 100 5Q.
B) a horizontal line at $9.
C) a horizontal line at $55.
D) P/N = (100 5Q)/N, where N is the total number of firms in the competitive market.
Q2) You are a manager in a perfectly competitive market.The price is $14.Your total cost curve is C(Q)= 10 + 4Q + 0.5Q<sup>2</sup>.What level of output should you produce in the short run?
A) 5
B) 8
C) 10
D) 15
Q3) What market can you think of,besides that for VCRs,that has shown short-run profits but,over time,has seen profits disappear due to entry?
Q4) If a monopolist has an own price demand elasticity of .8,is it maximizing profits?
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Chapter 9: Basic Oligopoly Models
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Sample Questions
Q1) Consider a market consisting of two firms where the inverse demand curve is given by P = 500 2Q<sub>1</sub> 2Q<sub>2</sub>.Each firm has a marginal cost of $50.Based on this information,we can conclude that aggregate quantity in the different equilibrium oligopoly models will follow which of the following orderings?
A) Q<sup>Collusion</sup> < Q<sup>Stackelberg</sup> < Q<sup>Cournot</sup> < Q<sup>Bertrand</sup>
B) Q<sup>Collusion</sup> < Q<sup>Cournot</sup> < Q<sup>Stackelberg</sup> < Q<sup>Bertrand</sup>
C) Q<sup>Bertrand</sup> < Q<sup>Collusion</sup> < Q<sup>Cournot</sup> < Q<sup>Stackelberg</sup>
D) Q<sup>Bertrand</sup> < Q<sup>Stackelberg</sup> < Q<sup>Cournot</sup> < Q<sup>Collusion</sup>
Q2) The Sweezy model of oligopoly reveals that:
A) capacity constraints are not important in determining market performance.
B) perfectly competitive prices can arise in markets with only a few firms.
C) changes in marginal cost may not affect prices.
D) All of the statements associated with this question are correct.
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Chapter 10: Game Theory: Inside Oligopoly
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Sample Questions
Q1) Refer to the following game. \(\begin{array}{l}
\quad\quad\quad\quad\quad\text { Firm B }\\
\text { Firm A}
\begin{array}{|l|l|l|}
\hline & \text {Low Price } & \text { High Price } \\
\hline \text {Low Price } & (10,9) & (15,8) \\
\hline \text { High Price } & (-10,7) & (11,11) \\
\hline \end{array}\end{array}\) What are the secure strategies for firm A and firm B respectively?
A) (low price, high price)
B) (high price, low price)
C) (high price, high price)
D) (low price, low price)
Q2) You are the manager of a firm that is "bargaining" with another firm over how much to pay for a key input your firm uses in production.Which type of bargaining would be "better" from your firm's point of view,simultaneous-move bargaining or take-it or leave-it bargaining?
Explain carefully.
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Page 12
Chapter 11: Pricing Strategies for Firms With Market Power
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) A monopoly produces X at a marginal cost of $10 per unit and charges a price of $20 per unit.Determine the elasticity of demand at the profit-maximizing price of $20.
A) 0.5
B) 2
C) 0.333
D) There is insufficient information to determine the monopoly's price elasticity of demand.
Q2) When two or more divisions mark up prices in excess of marginal cost:
A) double marginalization occurs.
B) two-part pricing occurs.
C) second-degree price discrimination occurs.
D) None of the answers are correct.
Q3) An industry produces 10,000 units of output at a price of $100.At the equilibrium price and quantity,the market elasticity of demand is -0.75.Does this industry consist of a profit-maximizing monopolist?
Q4) A monopolist is profit maximizing where the elasticity of demand is -2 and price is $4.What is the monopolist's marginal cost?
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13
Chapter 12: The Economics of Information
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Sample Questions
Q1) Jane wants to buy a beautiful doll as a gift for her sister's birthday.She knows that the same product is offered in different shops with prices of $120,$100,and $80 with odds of one-third of finding each price.She just stopped at a shop and knows that the price is $100.Suppose that there is a search cost of $5 for each search.Should she search one more time?
A) Yes
B) No
C) She should toss a coin.
D) Insufficient information to determine.
Q2) Many tout that the Internet has lowered consumers' search costs.If this is true,ceteris parabis,the consumer reservation price should:
A) be higher.
B) be lower.
C) remain the same.
D) There is insufficient information to determine the impact of lower search costs on reservation prices.
Q3) Explain why a used car that is only six months old and has been driven only 5,000 miles typically sells for 20 percent less than a new car with the same options.
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Chapter 13: Advanced Topics in Business Strategy
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90 Verified Questions
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Sample Questions
Q1) Firms 1 and 2 compete in a Cournot duopoly.If firm 1 adopts a strategy that raises firm 2's marginal cost:
A) firm 2 will increase its output.
B) firm 1 will increase market share.
C) firm 1 will suffer lower profits.
D) All of the statements associated with this question are correct.
Q2) A network linking six users is typically:
A) less likely to exhibit bottlenecks than a network linking two users.
B) three times as valuable as a network linking two users.
C) more than three times as valuable as a network linking two users.
D) less than three times as valuable as a network linking two users.
Q3) Consider a two-way network with 1,000 users.Adding one additional user to such a network benefits all users by adding:
A) 999 potential connections to the network.
B) 1,000 potential connections to the network.
C) 2,000 potential connections to the network.
D) 999,000 potential connections to the network.
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Page 15
Chapter 14: A Managers Guide to Government in the Marketplace
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Sample Questions
Q1) The main purpose of antitrust policy is to:
A) reduce market power.
B) control negative externalities.
C) help make information easily obtainable for producers and consumers.
D) All of the statements associated with this question are correct.
Q2) What is the immediate result of applying the Clean Air Act to a previously nonregulated industry?
A) Price decreases and production is reduced.
B) Price increases and production is reduced.
C) Price decreases and production is enlarged.
D) Price increases and production is enlarged.
Q3) Consumer surplus in the unregulated monopoly market in the figure below is:
A) $16.
B) $8.
C) $4.
D) $0.
Q4) You are the CEO of a firm with an industry HHI equal to 1,000.Your firm currently controls 20 percent of the market.The board of trustees wants you to consider merging with a firm that controls 10 percent of the market.Should you be concerned about antitrust proceedings?
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