Strategic Business Analysis
Chapter Exam Questions
Course Introduction
Strategic Business Analysis focuses on the tools, frameworks, and methodologies used to evaluate and guide organizational decision-making at the highest level. The course explores the analysis of internal and external environments, assessment of market opportunities and threats, resource and capability evaluation, and the development of sustainable competitive strategies. Emphasizing case studies and real-world applications, students learn to apply critical thinking and analytical skills to formulate business strategies, support effective planning, and drive organizational growth in dynamic markets.
Recommended Textbook
Managerial Economics 3rd Edition by Froeb
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Chapter 2: The One Lessor of Business
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Q1) Some critics of capitalism argue that
A)There is too much government intervention in the economy
B)Involuntary trade generates no wealth
C)If one person makes money,someone else must be losing it
D)Voluntary trade ensures gains for both consumers and producers
Answer: C
Q2) An example of price floor is
A)Minimum wages
B)Rent controls in New York
C)Both a and b
D)None of the above
Answer: A
Q3) A consumer values a car at $525,000 and a producer values the same car at $485,000.If the transaction is completed at $510,000,what amount of tax will result in unconsummated transaction?
A)A tax of $9,000
B)A tax of $14,000
C)A tax of $15,000
D)A tax of $18,000
Answer: D
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Chapter 3: Benefits, Costs, and Decisions
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Q1) "Buy now,pay later" or "try it before you buy it" are examples of
A)Loss aversion
B)Endowment effect
C)Confirmation bias
D)Anchoring bias
Answer: B
Q2) All the following are examples of accounting costs,except
A)Interest payments on borrowed funds
B)Costs paid to suppliers for product ingredients
C)Cost of equity
D)Depreciation expenses related to investments in buildings and equipment
Answer: C
Q3) If a firm is earning negative economic profits,it implies
A)That the firm's accounting profits are zero
B)That the firm's accounting profits are positive
C)That the firm's accounting profits are negative
D)More information is needed to conclude about accounting profits
Answer: D
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Chapter 4: Extent How Muchdecisions
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Q1) If hiring the 6th worker increases total product by 7 units and the price of each unit is $2,
A)the firm should not hire the 6th worker as MB<MC
B)marginal revenue equals $2
C)the firm should hire the 6th worker as MB>MC
D)the firm should not hire the 6th worker as MB<TC
Q2) What is the marginal revenue of producing the fourth unit?
A)90
B)40
C)20
D)180
Q3) If the firm hires 5 workers,the total amount of fixed costs equals
A)$250
B)$50
C)$200
D)$1200
Q4) The optimal amount of studying for the next exam is determined by comparing A)total benefit and the total cost of studying.
B)marginal benefit and the total cost of studying.
C)marginal benefit and the marginal cost of studying.
Page 5
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Chapter 5: Investment Decisions: Look Ahead and Reason
Back
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Q1) A firm will shut down in the long-run if
A)P>AVC
B)P<ATC
C)P=ATC
D)P>ATC
Q2) At what quantity is Sarah Machinery indifferent between two technologies?
A)5
B)6
C)7
D)8
Q3) A firm sells1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.The firm should
A)Shut-down as the firm is making a loss of $10,000 per week
B)Shut-down as the firm cannot cover the fixed costs
C)Continue operating as the firm is covering all the variable costs and some of the fixed costs
D)Shut-down because it is cost effective to pay off the remaining fixed costs
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Chapter 6: Simple Pricing
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Q1) The demand for Dell laptops is more price elastic than the demand for laptops as whole.This is best explained by
A)There are fewer substitutes for Dell laptops than for laptops as whole
B)There are more substitutes for Dell laptops than for laptops as whole
C)Dell laptops are luxurious goods
D)Dell laptops are a necessity
Q2) Assume mortgages and houses are complements in consumption;if the price of mortgages decreases (decreases in interest rates),we would expect to see
A)An increase in demand for houses
B)An decrease in demand for houses
C)An increase in the quantity of houses demanded
D)An decrease in the quantity of houses demanded
Q3) Which of the following statement is true?
A)The demand for Cheerios is less elastic than the demand for cereal
B)The demand for gas is more elastic in the short-run than in the long-run
C)The demand for puma shoes is more elastic than the demand for shoes
D)Products with many complements have a more elastic demand
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Chapter 7: Economies of Scale and Scope
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Q1) All these curves are U-shaped except
A)Average fixed cost curve
B)Marginal cost curve
C)Average variable cost curve
D)Average total cost
Q2) The term "bottleneck" refers to
A)when increasing variable inputs must share a fixed amount of complementary input.
B)"fixity" of some factor
C)None of the above
D)Both a and b
Q3) Diminishing marginal returns occur because
A)All inputs are variable in the short-run
B)All inputs are variable in the long-run
C)Some inputs are fixed and some inputs are variable in the short-run
D)None of the above
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Chapter 8: Understanding Markets and Industry Changes
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Q1) If the government imposes a price floor at $10 (i.e.the price must be $10 or higher)in the above market,how many goods will be traded?
A)Four
B)Five
C)Six
D)Seven
Q2) The price of peanuts increases.At the same time,we see the price for Jelly rise.How does this affect the market for peanut butter?
A)The demand curve will shift to the left;the supply curve will shift to the left
B)The demand curve will shift to the left;the supply curve will shift to the right
C)The demand curve will shift to the right;the supply curve will shift to the left
D)The demand curve will shift to the right;the supply curve will shift to the right
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Chapter 9: Market Structure and Long-Run Equilibrium
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Q1) Which of the following cannot be classified as a market structure?
A)Oligopoly
B)Monopolistic Competition
C)Mergers
D)Perfect Competition
Q2) A monopolist maximizes revenue at
A)At MR= MC
B)At MR>MC
C)At P=MR
D)At MR=0
Q3) A market tends to be monopolistic if
A)The good has too many substitutes
B)The good has very few substitutes
C)The good has too many complements
D)The good has very few complements
Q4) In the long-run,a perfectly competitivel firm will achieve
A)Average rate of return
B)Above average profits
C)Losses
D)Economic Profits
10
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Chapter 10: Strategy: the Quest to Keep Profit From Eroding
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Q1) The five forces model is a framework
A)For increasing buyer force in the market
B)For improving competition in the industry
C)For analyzing the attractiveness of an industry
D)Of matching resources and capabilities of the firm
Q2) What are the different methods to measure industry concentration?
A)Four-firm concentration ratio.
B)HHI index.
C)Total output
D)a and b only
Q3) The industrial organization economics perspective locates the source of advantage at the
A)Individual firm level
B)Industry level
C)Both a and b
D)None of the above
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Chapter 11: Foreign Exchange, trade, and Bubbles
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Q1) Holding other things constant,decreases in the price level in the US will
A)Cause the dollar to gain value
B)Cause the dollar to lose value
C)Does not affect the dollar value
D)None of the above
Q2) The purchasing power parity predicts that if US price level rises relative to the Mexico price level,then
A)Dollar value will rise relative to the peso
B)Dollar value will fall relative to the peso
C)There is no effect on either currency
D)PPP predicts price level will normalize in the long-run
Q3) If Chinese consumers want to buy US goods,they will
A)buy Yuans to sell US Dollars
B)Sell Yuans to buy US Dollars
C)Demand Yuan
D)Both b and c
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Chapter 12: More Realistic and Complex Pricing
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Q1) After firm A producing one good acquired another firm B producing another good,it raised the prices for the bundle of goods.One can conclude that the goods were
A)substitutes
B)complements
C)not related
D)None of the above
Q2) On average,if demand is unknown and costs of underpricing are _______ than the costs of overpricing,then _________.
A)Smaller;overprice
B)Smaller;underprice
C)Larger;underprice
D)None of the above
Q3) Firms tend to lower the price of their goods after acquiring a firm that sells a complementary good because
A)They gain market power
B)There is an increase in the overall demand for their products
C)The bundle has a more elastic demand than individual goods
D)The bundle has a more inelastic demand than individual goods
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Chapter 13: Direct Price Discrimination Indirect Price Discrimination
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Q1) When grocery stores offer discount coupons on Sunday papers,it is trying to
A)Price discriminate
B)Undercut its competition
C)Reward the frequent readers
D)Provide a social service
Q2) Which of the following is not an example of price discrimination?
A)Senior citizen discount at the movies
B)Grocery coupons
C)Children haircuts
D)Charging a higher price for ice-cream during the summer and a lower price in the winter
Q3) What is the total profit to the monopolist from selling the goods separately?
A)$4,500
B)$6,300
C)$7,000
D)$6,200
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Chapter 15: Strategic Games
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Q1) When the game does reach the Nash Equilibrium,the payoffs for both stores will be
A)Megastore $95 and Superstore $80
B)Megastore $305 and Superstore $55
C)Megastore $65 and Superstore $285
D)Megastore $165 and Superstore $115
Q2) The Nash equilibrium for both stores is
A)For megastore to advertise and for superstore to advertise
B)For megastore to advertise and for superstore not to advertise
C)For megastore not to advertise and for superstore to advertise
D)For megastore not to advertise and for superstore not to advertise
Q3) If both firms plan to be in business for one-year,the Nash Equilibrium will be
A)For each firm charge LP
B)For neither firm to charge LP
C)For one firm to charge LP and the other HP
D)None of the above.
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Chapter 16: Bargaining
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Q1) In the nonstrategic view of bargaining
A)Insights are drawn from how many similar games are played without specifying the strategies
B)We use the fact that bargaining often results in a fifty-fifty split
C)The bargain is affected by the parties' disagreement values
D)All of the above
Q2) Which of the following will improve your supplier contracting bargaining position
A)Your supplier merges with an alternative supplier
B)You redesign your component requirements to be more flexible across different potential suppliers
C)You redesign your component requirements so that your preferred supplier is more integral to product success
D)Your supplier's chief competitor has exited the market
Q3) In the labor negotiation game:
A)The payoffs are always higher if you accommodate
B)The payoffs are always higher if your opponent accommodates
C)The payoffs from accommodating are only higher if your opponent bargains hard
D)The payoffs from accommodating are only higher if your opponent accommodates
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Chapter 17: Making Decisions With Uncertainty
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Q1) Three possibilities have probabilities 0.5,0.4 and 0.1 and values $10,$20,and $30 respectively.The expected value is:
A)$15
B)$16
C)$17
D)$18
Q2) Heads and tails are equally likely but you win a dollar on heads and lose a dollar on tails
A)the expected value is $0.50
B)the expected value is -$0.50
C)the expected value is $1.00
D)the expected value is $0.00
Q3) Six possibilities are equally likely and have payoffs of $2,$4,$6,$8,$10,and $12.The expected value is:
A)$4
B)$5
C)$6
D)$7
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Chapter 18: Auctions
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Q1) The winners curse is more often associated with;
A)oral auctions
B)second-price auctions
C)first-price sealed bid auctions
D)common value auctions
Q2) An oral auction
A)is also called a Vickrey auction
B)is where bidders submit increasing bids until all but one remains
C)is where the highest bidder wins and pays the amount of the next highest bid
D)all of the above
Q3) To attract more bidders,and more aggressive bidders,to your auction
A)reveal all of the relevant information about the value of the object
B)don't allow bidders to know how others are bidding
C)do not allow potential bidders to examine the object too closely
D)do not hold oral auctions
Q4) Bid-rigging is more likely when
A)auctions are larger
B)auctions are frequent
C)auctions generate different sets of potential bidders
D)the auctioneer is paid on commission rather than a fixed fee
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Chapter 19: The Problem of Adverse Selection
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Q1) Adverse selection is
A)when people act differently because they are insured
B)when more risk averse people want to be insured more
C)when people at greater risk want to be insured more
D)when your guess at a test question is wrong
Q2) An indication that Insurance companies anticipate adverse selection is
A)they require a deductible
B)they do not classify clients into different risk types according to their claim history
C)they do not classify clients into different risk types according to pre-existing conditions
D)they do not require a co-payment
Q3) Individuals who are more risk averse
A)buy less insurance
B)buy more insurance
C)are not more or less inclined to buy insurance
D)are philosophically opposed to insurance
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Chapter 20: The Problem of Moral Hazard
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Q1) You offer an extended warranty for your product that is purchased by a few customers.If the product typically fails 2% of the time,
A)you should price the warranty at less than 2% of the product price
B)you should price the warranty at exactly 2% of the product price
C)you should price the warranty at more than 2% of the product price
D)Cannot tell from this information
Q2) An example of moral hazard is
A)A taxi driver paid per mile taking the shortest route
B)a piece-rate garment worker shirking less than a per jour worker
C)an hourly salesman working harder than a commission salesman
D)an author on contract going to as many book signings as one with a percentage royalty rate
Q3) Which is NOT an example of moral hazard
A)people eat more at all-you-can-eat buffets
B)loggers clear-cut a tract of land rather than when paying per tree felled
C)Drivers of heavier,safer cares are less likely to run stop signs
D)workers on commission work harder than those paid an hourly wage
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Chapter 21: Getting Employees to Work in the Firms Best
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Q1) When decision rights are decentralized,typically
A)decisions are being moved to those with less of the relevant information
B)decisions are being moved from those with stronger incentives to make good decisions
C)decisions are being moved from those with more of the relevant information
D)decisions are being moved from those with weaker incentives to make good decisions
Q2) The ways to address agency costs include all EXCEPT
A)running background checks on prospective employees
B)hiring only from job fairs
C)spot checks of the quality of employee work
D)replacing closed offices with cubical office spaces
Q3) The types of problems in principal-agent relationships typically include
A)adverse selection - whom to hire
B)moral hazard - how to motivate workers
C)uncertainty - how many workers will be needed
D)a and b.
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Chapter 22: Getting Divisions to Work in the Firms Best
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Q1) When a transfer price is set lower
A)the costs of the division using the intermediate product will fall
B)the profits of the division using the intermediate product will be unaffected
C)the profits of the division using the intermediate product will fall
D)the profits of the division using the intermediate product will rise
Q2) The advantages of the U-Form of firm organization is A)workers develop a high degree of functional expertise
B)information can be easily shared between similarly trained employees within units
C)evaluating employees is easier because managers typically are similarly trained D)all of the above
Q3) All of the following describe the conflict between divisions EXCEPT
A)some activities across divisions benefit from coordination
B)managers of profit centers care too little about the effects of their decisions on other divisions
C)managers are rewarded only for how well their own division is run
D)A divisional manager does not have authority to run her division efficiently
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Chapter 23: Managing Vertical Relationships
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Q1) Vertical relationships can increase profits through
A) preventing firms from evading regulation
B) eliminating a double-markup problem
C) making the incentives of manufacturers and retailers unaligned
D) preventing price discrimination
Q2) Double markup problems arise when
A) upstream firms have market power
B) downstream firms have no market power
C) upstream and downstream products are unrelated in demand
D) upstream and downstream firm's pricing decisions tend to increase the demand for the other product
Q3) Double markup problems arise because
A) upstream firms have no market power
B) downstream firms have no market power
C) upstream and downstream products are unrelated in demand
D) upstream and downstream firm's pricing decisions tend to decrease the demand for the other product
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