Strategic Management Test Preparation
Course Introduction
Strategic Management is an integrative course that explores the formulation, implementation, and evaluation of organizational strategies to achieve sustainable competitive advantage. Students will examine key concepts such as external and internal analysis, strategy formulation processes, leadership in strategy, and the alignment of resources with strategic objectives. The course emphasizes the importance of decision-making in uncertain environments, ethical considerations, and the dynamic nature of competitive landscapes. Through case studies and real-world applications, learners will develop analytical and critical thinking skills necessary to evaluate business situations and recommend effective strategies for long-term organizational success.
Recommended Textbook Managerial Economics 5th Edition by
Luke M. Froeb
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21 Chapters
1734 Verified Questions
1734 Flashcards
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Page 2
Chapter 1: The One Lessor of Business
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) A creative entrepreneur is one who knows how to
A)Run a business
B)Escape the burden of taxes
C)Profitably exploit money making opportunities
D)All of the above
Answer: C
Q2) A consumer values a car at $30,000 and a producer values the same car at $20,000.If a tax is levied on the seller,what level of tax will result in unconsummated transaction?
A)0%
B)25%
C)60%
D)40%
Answer: C
Q3) Price ceilings cause
A)Some suppliers to drop out of the market
B)A decrease in the total production in the market
C)The creation of black markets
D)All the above
Answer: D
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Chapter 2: Benefits, Costs, and Decisions
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67 Flashcards
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Sample Questions
Q1) If a firm is earning negative economic profits,it implies
A)That the firm's accounting profits are necessarily zero
B)That the firm's accounting profits are necessarily positive
C)That the firm's accounting profits are necessarily negative
D)Economic profits alone cannot determine accounting profits
Answer: D
Q2) All of the following costs are included in the calculation of accounting profit,except
A)Interest payments on borrowed funds
B)Costs paid to suppliers for product ingredients
C)Opportunity cost of capital
D)Depreciation expenses related to investments in buildings and equipment
Answer: C
Q3) The opportunity cost of an action:
A)is equal to the marginal cost of an action
B)is equal to explicit cost
C)is equal to the cost of the next best alternative forgone
D)is the total cost of an action
Answer: C
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4
Chapter 3: Extent How Much Decisions
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76 Flashcards
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Sample Questions
Q1) An airline's flight is about to take off.It has a few empty seats left aboard.If it lowers its prices,it can fill the remaining seats and fly at full capacity.What should be done?
A)Sell the additional standby seats at a discount since the marginal costs of the additional passenger are almost zero and fly at full capacity
B)Sell the additional standby seats without a discount
C)Don't offer the additional seats for any price
D)none of the above
Answer: A
Q2) If a firm produces 10 units,TC=$100.When the firm increase its output to 15 units,TC= $150.The firm's AVC equal to
A)$5
B)$10
C)$50
D)$100
Answer: B
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Chapter 4: Investment Decisions: Look Ahead and Reason
Back
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85 Flashcards
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Sample Questions
Q1) A firm sells 1000 units per week.It charges $15 per unit,the average variable costs are $10,and the average costs are $25.At what price does the firm consider shutting-down in the short run?
A)$25
B)$0
C)$15
D)$10
Q2) A firm will shut down in the long-run if
A)P>AVC
B)P<ATC
C)P=ATC
D)P>ATC
Q3) Which of the following defines a sunk cost?
A)Cost of the next best alternative
B)Cost of producing an additional unit
C)An asset with no scrap value
D)Total cost of producing a product
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Page 6
Chapter 5: Simple Pricing
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) What is an aggregate demand curve
A)The demand of an individual with respect to price
B)The total demand of the market with respect to price of a good
C)The preference of an individual in the market
D)None of the above
Q2) The own price elasticity of Anne's apple pies is 5.If the aggregate market for apple pies has an own price elasticity of 1.25,Anne's apple pies has an approximate market share of
A)6.25%
B)25%
C)10%
D)20%
Q3) Ingrid's Ice cream Parlor has an own price elasticity of 5.It has an approximate share of 10% in the market for ice cream.What is the aggregate own price elasticity of the market?
A)0.1%
B)0.5%
C)0.7%
D)1%
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Page 7
Chapter 6: Economies of Scale and Scope
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63 Flashcards
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Sample Questions
Q1) A food truck operator originally produced hamburgers and hotdogs.To serve the tastes of their various customers,the hot dog vendor decides to start producing turkey dogs and ham sandwiches as well.Since the new products were introduced,average costs rose dramatically.The vendor is experiencing
A)Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)Diseconomies of scope
Q2) The law of diminishing marginal productivity states that
A)As you expand output,your marginal productivity eventually increases
B)As you expand output,your marginal productivity eventually declines
C)As you expand output,the total product eventually increases
D)None of the above
Q3) A food company trying to increase its profits by expanding in to the soft drinks business is an example of
A)Economies of scale
B)Economies of Scope
C)Diseconomies of Scale
D)Diseconomies of Scope
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Chapter 7: Understanding Markets and Industry Changes
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82 Flashcards
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Sample Questions
Q1) Peter's Pizzeria sells both pizzas and wings.It wants to increase the sales of its pizzas.If it decides to increase the price of the wings,it is assuming that
A)the pizza and the wings are substitutes
B)the pizza and the wings are complements
C)the pizza and the wings are unrelated in demands
D)it cannot increase the sales of its pizzas
Q2) A recent medical study shows that peanuts are one of the leading causes of high cholesterol.This would cause the demand for peanuts to
A)Shift to the left
B)Shift to the right
C)go down the demand curve
D)not change
Q3) Demand and supply analysis is particularly important if
A)the success of your firm is closely linked to the profitability of your primary industry
B)the success of your firm is independent of the profitability of your primary industry
C)the success of your firm is unlikely
D)demand and supply analysis is unimportant
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Chapter 8: Market Structure and Long Run Equilibrium
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73 Flashcards
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Sample Questions
Q1) Which of the following cannot be classified as a market structure?
A)Perfect Competition
B)Monopoly
C)All of the above
D)None of the above
Q2) Low risk stocks are usually accompanied by
A)low returns
B)no returns
C)high returns
D)no sales-no one would buy low risk stocks
Q3) A new cure for Toenail fungus is discovered for individuals resistant to the original treatment.At this point the firm producing this drug
A)Could be considered a monopoly
B)Would be protected from entry by patents
C)Would be facing many new entries in the market
D)Only A&B
Q4) MBA Degree Programs
Every year various business magazines rank the quality of the different MBA programs.Why don't all prospective students flock to the highest ranked program?
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Chapter 9: Strategy: the Quest to Keep Profit From Eroding
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) For a resource to be able to generate sustained competitive advantage over rivals,it must be
A)Valuable
B)Rare
C)Difficult to imitate or substitute away from
D)All of the above
Q2) Supplier Power
Nora's Nicest Knick Knacks has produces a variety of products sold as souvenirs.She started out printing local sayings on tee-shirts, e.g. ,FDNY,and purchased plain tee-shirts from a single supplier.Since then,she has added coffee mugs,key chains,souvenirs spoons and many other items.For each of these,she has lined up one or more suppliers.How does the change in the sourcing of her inputs affect how much of the value she creates that she gets to capture?
Q3) Which of the following could potentially capture the value created in a market
A)Suppliers
B)Industry rivals
C)Buyers
D)All of the above
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11
Chapter 10: Foreign Exchange, Trade, and Bubbles
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) A Swiss consumer wants to buy an American laptop.The exchange rate is 1USD=0.89CHF (Swiss Francs).The laptop costs $800.How much would the laptop cost him in Swiss Francs?
A)1200 Francs
B)1160Francs
C)890Francs
D)712 Francs
Q2) The term to describe one currency in terms of another is called
A)The interest rates
B)The market price
C)The inflation rate
D)The exchange rate
Q3) Holding other things constant,an appreciation of the US Dollar relative to the Chinese Yuan causes the demand for the Yuan to _____________ and the supply for Yuan to
A)Increase;decrease
B)Increase,increase
C)Decrease;Increase
D)Decrease;Decrease
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Page 12
Chapter 11: More Realistic and Complex Pricing
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) Cover Charges
Hank's Honkytonk is a local bar and nightspot.On weekends,it requires a $5 cover charge to defray the costs of the live musical acts Hank brings in.This has worked wonderfully,as it generates capacity crowds and a long line of people waiting to enter.However,after the cost of the acts,he still loses money on the weekends.What is his marginal revenue and marginal cost of a patron on weekends and how should he attempt to fix his unprofitability problem?
Q2) In a multi-product firm,cannibalization is
A)An increase in the quality of both the brand's products
B)A decrease in the quality of both the brands products
C)An increase in both the brand's sales
D)An increase in one of the brand's sales due to the decrease in sales of the other.
Q3) By focusing the customers on the price of a product,you make
A)The demand for the product more inelastic
B)The customers less price sensitive to the product
C)The demand for the product more elastic
D)Only B&C
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Page 13
Chapter 12: Direct Price Discrimination
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84 Flashcards
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Sample Questions
Q1) Which of the following is an example of the "metering" strategy
A)A doll company selling dolls at cost but charging high margins on doll accessories
B)A cell phone company offers free locked in phones but charges high prices per call
C)A catering company pays its chefs higher wages to make sure that the bargain meals are just slightly burnt
D)Only A&B
Q2) What is the maximum that the firm can charge for the no-name brand wok without losing customers?
A)$50
B)$60
C)$70
D)$100
Q3) The "damaged goods" strategy refers to
A)Trying to sell damaged goods to your customers
B)Damaging the goods after they have been paid for but before the shipping
C)Incurring additional costs to make the cheaper goods unattractive to high-value users
D)Incurring additional costs to make the more expensive goods better quality
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Chapter 13: Strategic Games
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) If the apartment owner can somehow see the effort of the each of the room mates and punishes with a loss of 5 to any room mate who doesn't clean,is that likely to lead to a more efficient outcome?
A)No because they would have to clean against their will
B)Yes because now they would both get a utility of 3
C)No because neither of them like cleaning
D)No because filth is good
Q2) If Sarah decides to hit Tom,what would Tom's best response be
A)Tell
B)Not tell
C)Run
D)Hide
Q3) If the simultaneous game is instead changed into a sequential game where the shoplifter can see whether the security guard is vigilant or not before deciding to steal.What is the Nash equilibrium of the game?
A)Steal,Vigilant
B)Steal,Not vigilant
C)Not steal,Vigilant
D)Not steal,Not vigilant
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Page 15
Chapter 14: Bargaining
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82 Flashcards
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Sample Questions
Q1) You can capture a bigger piece of the pie if
A)You can decrease your counter party's gains from reaching an agreement
B)You can increase you gain from reaching an agreement
C)All of the above
D)None of the above
Q2) Jim is haggling with a car dealer on the price of a used car.During the bargaining,the storekeeper discovers that the car's stereo is better than he or Jim originally realized.If Jim is a huge music fan,the total surplus available from the sale
A)Increases
B)Decreases
C)Is not affected
D)All of the above
Q3) The disagreement value in a nonstrategic game is most closely associated with A)opportunity costs
B)fixed costs
C)variable costs
D)accounting costs
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Page 16
Chapter 15: Making Decisions With Uncertainty
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Transcendent Alternatives
Transcendent Technologies is deciding between developing complicated,thought-activated software,or simple,voice-activated software.The voice-activated software would cost $50 million to develop and has a 60% chance of being successfully launched and generating revenue of $100 million.The thought-activated software would be a bonanza if successful,generating $1 billion in revenue.But it is so complicated,it is projected to cost would be $400 million.How likely would success have to be for Transcendent Technologies to opt for the thought-activated software?
Q2) The VP in charge of product launches hypothesizes that a particular product would be profitable,then launching an unprofitable product is a
A)Type I error
B)Type II error
C)Type III error
D)Type IV error
Q3) Type I errors are
A)False negatives
B)False positives
C)True negatives
D)True positives
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Chapter 16: Auctions
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Sample Questions
Q1) An English auction is
A)A sealed auction
B)An oral auction
C)An auction where bidders submit decreasing bids
D)All of the above
Q2) If the bidders at a first-price auction have true values of $8,$7,$6,and $5,the item will sell for
A)$8
B)$7
C)just over $8
D)just under $7
Q3) If the bidders at a first-price auction have true values of $78,$72,$66,and $65,the item will sell for
A)Just above $78
B)just over $72
C)$78
D)$72
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Chapter 17: The Problem of Adverse Selection
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Sample Questions
Q1) How much would Nadia be willing to pay for the insurance?
A)$900
B)$1000
C)$1100
D)$1200
Q2) The "lemons" problem is that
A)cars of verifiable high quality are withheld from the used car market
B)cars of verifiable low quality are withheld from the used car market
C)cars of unverifiable high quality are withheld from the used car market
D)cars of unverifiable low quality are withheld from the used car market
Q3) Car Depreciation
A common complaint is that a new car will depreciate by 25% as soon as the new owner drives it off the lot.This information comes from resale price data from cars sold just months after the initial purchase.How does adverse selection imply that most cars depreciate much less?
Q4) Offering an expensive engagement ring to your (future)bride is a
A)Screening mechanism
B)Signaling mechanism
C)Way to waste money
D)None of the above
Page 19
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Chapter 18: The Problem of Moral Hazard
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Sample Questions
Q1) Would Tom install the safety equipment?
A)Yes because it costs him less than it is worth
B)Yes because it costs him more than it is worth
C)No because it costs him more than it is worth
D)No because it costs him less than it is worth
Q2) One difference between moral hazard and adverse selection is
A)Moral hazard has to do with unobservable characteristics of individuals
B)Adverse selection has to do with unobservable actions of individuals
C)Adverse selection is when individuals change their behaviors because of a contract
D)Adverse selection is when you choose the wrong answer on a test
Q3) Which is NOT an example of moral hazard
A)people eat less at all-you-can-eat buffets
B)loggers clear-cut a tract of land when paying a fixed price rather than when paying per tree felled
C)Drivers of heavier,safer cares are more likely to run stop signs
D)workers on commission work harder than those paid an hourly wage
Q4) Rental Car Maintenance
Why do rental cars require more maintenance in their first 50,000 miles than comparable cars driven by private owners?
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Chapter 19: Getting Employees to Work in the Firms Best Interest
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108 Flashcards
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Sample Questions
Q1) Sharing contracts in franchising is when
A)The franchisor pays a fixed franchisor fee
B)The franchisor pays a percentage of the revenue or profit of the restaurant
C)The franchisor fee is decreased to 50%
D)The franchise gets to share the franchise fee with other restaurants
Q2) Potential problems with incentive based compensation are
A)not evaluating the relevant performance measures
B)rewarding outcomes that are not included in the performance evaluation
C)not granting rewards for meeting performance measures
D)all of the above
Q3) In a situation where a car salesman is selling cars on behalf of the dealer,the salesman is the
A)Principal
B)Agent
C)Both of the above
D)None of the above
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Chapter 20: Getting Divisions to Work in the Firms Best
Interest
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Sample Questions
Q1) Managers of profit centers usually have
A)A lot of discretion over decisions
B)Most of their decisions overseen by corporate executives
C)No discretion over decisions
D)Given excessively high bonuses
Q2) A profit center
A)Is very complicated to run and manage
B)Doesn't require a lot of attention from executives at the firm's headquarters
C)Requires the parent company's highest degree of attention
D)Does not properly incentivize the managers when it comes to their own division's performance
Q3) Conflicts can arise between divisions because
A)Coordination between divisions does not benefit all divisions equally
B)managers of profit centers care too little about the effects of their decisions on other divisions
C)managers are rewarded only for actions that increase their own divisional profit regardless of their effects on other divisions
D)all of the above
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Chapter 21: Managing Vertical Relationships
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Sample Questions
Q1) Vertical contracts between manufacturers and retailers often aim to
A)Incentivize the retailers to undertake costly activities,which they otherwise may not realize the full benefits of on their own
B)Reward the retailer for undertaking the risk inherent in introducing a new product
C)Serve as a "signal" of the manufacturer's belief of the likely success of his product
D)All of the above
Q2) Horizontal contracts often
A)Increase competition between substitute products
B)Eliminate competition between substitute products
C)Do not change the competition between substitute products
D)None of the above
Q3) Vertical contracts that aim to decrease retailer prices typically
A)Benefits the consumers,manufacturers and retailers
B)Hurts all the manufacturers,consumers and retailers
C)Benefit the manufacturer,hurt the consumer and retailer
D)Benefit the retailer,hurt the manufacturer and consumer
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