Economics And Business Quiz: Strategy & Policy
Economics and business are quite interesting to study as they are living subjects. The quiz below tests your knowledge of different business conditions and policy-related issues. All the best in the quiz as you gain more knowledge.
- 1.
The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?
- A.
Introduction
- B.
Growth
- C.
Maturity
- D.
Decline
Correct Answer
C. MaturityExplanation
In the maturity stage of the market life cycle, the size of pricing and differentiation advantages between competitors decreases. This is because as the market matures, more competitors enter the market, leading to increased competition. As a result, it becomes more difficult for companies to differentiate their products or services and maintain pricing advantages. The market becomes saturated, and customers have more options to choose from, making it harder for companies to stand out. Consequently, the size of pricing and differentiation advantages decreases in this stage.Rate this question:
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- 2.
Outback Steakhouse has developed a sophisticated quantitative model and found that there were positive relationships between employee satisfaction, customer satisfaction, and financial results. According to the text, this is an example of _____________________.
- A.
Zero-sum relationship among stakeholders
- B.
Stakeholder symbiosis
- C.
Rewarding stakeholders
- D.
Emphasizing financial returns
Correct Answer
B. Stakeholder symbiosisExplanation
The given text states that Outback Steakhouse has developed a quantitative model that shows positive relationships between employee satisfaction, customer satisfaction, and financial results. This suggests that Outback Steakhouse recognizes the importance of all its stakeholders (employees, customers, and financial outcomes) and strives to create a mutually beneficial relationship among them. This aligns with the concept of stakeholder symbiosis, where the organization acknowledges the interdependence and mutual benefits among its various stakeholders.Rate this question:
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- 3.
Crowdsourcing can be defined as _______________________.
- A.
Using surveys to get supplier input.
- B.
Using multiple sources for a firm's raw material inputs.
- C.
Tapping the latent talent of the online crowd.
- D.
Addressing strategic issues directly with managers and employees.
Correct Answer
C. Tapping the latent talent of the online crowd.Explanation
Crowdsourcing can be defined as tapping into the latent talent of the online crowd. This means utilizing the skills, knowledge, and expertise of a large group of people who are connected through the internet to solve problems, generate ideas, or complete tasks. It involves outsourcing tasks or seeking input from a diverse and decentralized group of individuals, often through open calls or competitions. By accessing the collective intelligence of the crowd, organizations can benefit from a wide range of perspectives, creativity, and expertise that may not be available within their own workforce.Rate this question:
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- 4.
Interest rate increases have a ____________ impact on the residential home construction industry and a _______________ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items.
- A.
Positive; negligible
- B.
Negative; negligible
- C.
Negative; positive
- D.
Positive; negative
Correct Answer
B. Negative; negligibleExplanation
An increase in interest rates has a negative impact on the residential home construction industry because it makes borrowing money more expensive, discouraging potential homebuyers from taking out loans to build new homes. On the other hand, the effect on industries that produce consumer necessities such as prescription drugs or basic grocery items is negligible because these goods are considered essential and people will continue to purchase them regardless of changes in interest rates.Rate this question:
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- 5.
Examples of ___________ include: “to be the happiest place on earth” (Disney), and “restoring patients to full life” (Medtronic).
- A.
Vision statements
- B.
Mission statements
- C.
Strategic objectives
- D.
Operational objectives
Correct Answer
A. Vision statementsExplanation
Vision statements are statements that describe the desired future state or long-term goals of an organization. They provide a clear and inspirational picture of what the organization aims to achieve or become. In the given examples, "to be the happiest place on earth" and "restoring patients to full life" are both statements that outline the desired future state or goal of Disney and Medtronic respectively. These statements reflect the organizations' vision and serve as a guiding principle for decision-making and goal-setting.Rate this question:
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- 6.
All of the following are types of information that a firm is required to disclose except _______________.
- A.
Quarterly and annual filings of financial information
- B.
Stock trading by insiders
- C.
Details of new products under development
- D.
Details of executive compensation packages
Correct Answer
C. Details of new products under developmentExplanation
A firm is required to disclose information that is relevant to its financial performance and operations. Quarterly and annual filings of financial information provide transparency to investors and stakeholders about the firm's financial health. Stock trading by insiders is important to prevent insider trading and ensure fairness in the market. Details of executive compensation packages are disclosed to promote transparency and accountability in corporate governance. However, details of new products under development are not required to be disclosed as they may contain sensitive and proprietary information that could give competitors an advantage.Rate this question:
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- 7.
Recently, a knowledge worker’s loyalty to his or her employing firm has __________ compared to his or her loyalty to his or her profession and colleagues.
- A.
Increased
- B.
Decreased
- C.
Remained the same
- D.
No correlation when
Correct Answer
B. DecreasedExplanation
The loyalty of knowledge workers to their employing firm has decreased compared to their loyalty to their profession and colleagues. This suggests that knowledge workers are becoming less attached to their organizations and more focused on their own professional development and relationships with peers in the industry. This could be due to various factors such as increased job mobility, a desire for more autonomy and flexibility, or a shift in the importance placed on organizational loyalty in the modern workplace.Rate this question:
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- 8.
According to the text, all of the following might make it difficult for entrepreneurial firms to effectively pursue a strategy of differentiation except ________________________.
- A.
Incumbent firms are constantly seeking opportunities to specialize in market niches.
- B.
Differentiation strategies are often too expensive to enact.
- C.
It may be difficult for a young firm to establish a strong brand identity.
- D.
Implementing superior new technologies may be challenging for entrepreneurial firms.
Correct Answer
A. Incumbent firms are constantly seeking opportunities to specialize in market niches. -
- 9.
The sale of Boeing’s commercial aircraft and Microsoft’s operating systems in many countries enable these companies to benefit from _____________.
- A.
Higher prices in their domestic markets.
- B.
Economies of scale.
- C.
Optimizing the location for many activities in their value chain.
- D.
Reducing their exposure to currency risks.
Correct Answer
B. Economies of scale.Explanation
Boeing and Microsoft benefit from economies of scale through the sale of their commercial aircraft and operating systems in many countries. Economies of scale refer to the cost advantages that companies achieve when they produce goods or services in large quantities. By selling their products globally, Boeing and Microsoft can take advantage of increased production volumes, which leads to lower average costs per unit. This allows them to be more competitive in the market and potentially increase their profitability.Rate this question:
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- 10.
To illustrate interrelationships among different segments of the general environment: The persistence of large U.S. trade deficits (_____________) has led to greater demand for protectionist measures, such as trade barriers and quotas (____________). These measures lead to higher prices for U.S. consumers and fuel inflation (_____________).
- A.
Macroeconomic, sociocultural, political/legal
- B.
Macroeconomic, political/legal, macroeconomic
- C.
Macroeconomic, technological, macroeconomic
- D.
Macroeconomic, global, macroeconomic
Correct Answer
B. Macroeconomic, political/legal, macroeconomicExplanation
The persistence of large U.S. trade deficits (macroeconomic) has led to greater demand for protectionist measures, such as trade barriers and quotas (political/legal). These measures lead to higher prices for U.S. consumers and fuel inflation (macroeconomic). This explanation shows the interrelationship between macroeconomic factors (trade deficits and inflation) and political/legal factors (protectionist measures) in the general environment.Rate this question:
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- 11.
_____________ may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through _____________ and _____________ can provide.
- A.
Strategic alliances; joint ventures, internal development
- B.
Internal development; mergers; acquisitions
- C.
Strategic alliances; mergers; joint ventures
- D.
Mergers; internal development; strategic alliances
Correct Answer
B. Internal development; mergers; acquisitionsExplanation
Internal development refers to the process of growing a company by investing in its own resources and capabilities. This can be time-consuming as it requires the company to build everything from scratch. On the other hand, mergers and acquisitions involve combining with or acquiring other companies to quickly gain access to their resources and capabilities. These strategies can provide faster growth opportunities compared to internal development. However, if firms choose to focus solely on internal development, they may miss out on the speed and benefits that mergers and acquisitions can offer.Rate this question:
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- 12.
Which of the following is not one of the functions of reward and incentive systems?
- A.
They represent a poor means of influencing an organization’s culture
- B.
They focus efforts on high-priority tasks
- C.
They motivate high levels of individual and collective task performance
- D.
They represent an effective control mechanism
Correct Answer
A. They represent a poor means of influencing an organization’s cultureExplanation
Reward and incentive systems are designed to motivate high levels of individual and collective task performance, focus efforts on high-priority tasks, and represent an effective control mechanism. However, they do not directly influence an organization's culture. While reward systems can indirectly shape culture by reinforcing certain behaviors, they are not the primary means of influencing culture. Other factors such as leadership, values, and norms play a more significant role in shaping organizational culture.Rate this question:
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- 13.
ABC, Incorporated desires to have the most qualified people in every position throughout its organization. This is an example of a concern for _______________.
- A.
Developing human capital
- B.
Developing social networks
- C.
Decreasing labor intensive training
- D.
Leveraging organizational structure
Correct Answer
A. Developing human capitalExplanation
This statement indicates that ABC, Incorporated wants to have the most qualified individuals in every position within their organization. This suggests that they are focused on developing the skills, knowledge, and capabilities of their employees, which is known as developing human capital. By prioritizing the development of their workforce, ABC, Incorporated aims to ensure that they have the best talent to drive their organization's success.Rate this question:
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- 14.
Which of the following statements about the introduction stage of the market life cycle is true?
- A.
It produces relatively large, positive cash flows.
- B.
Strong brand recognition seldom serves as an important switching cost.
- C.
Market share gains by pioneers are usually easily sustained for many years
- D.
Products or services offered by pioneers may be perceived as differentiated simply because they are new.
Correct Answer
D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.Explanation
In the introduction stage of the market life cycle, products or services offered by pioneers may be perceived as differentiated simply because they are new. This means that customers may see the newness of the product or service as a unique feature, leading them to perceive it as different from existing offerings in the market. This perception of differentiation can help pioneers gain initial market share and attract customers. However, it is important to note that this perceived differentiation may not be sustainable in the long term as competitors enter the market and offer similar products or services.Rate this question:
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- 15.
Which of the following examples demonstrates how successful organizations manage their primary activities?
- A.
By employing JIT inventory systems, Hewlett Packard has been able to cut lead time from five days to one
- B.
Motorola has revised its compensation system to reward employees who learn a variety of skills
- C.
National Steel improved its efficiency by consolidating, reducing the number of job classifications, and broadening worker responsibilities.
- D.
Walmart implemented a sophisticated information system that resulted in reduced inventory carrying costs and shortened customer response times.
Correct Answer
A. By employing JIT inventory systems, Hewlett Packard has been able to cut lead time from five days to oneExplanation
This example demonstrates how successful organizations manage their primary activities by implementing JIT (Just-in-Time) inventory systems. By doing so, Hewlett Packard was able to significantly reduce their lead time from five days to one. This indicates that they have effectively optimized their inventory management process, resulting in improved efficiency and reduced waiting time for customers.Rate this question:
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- 16.
Netflix CEO Reed Hastings made this important observation about dealing with rivals:
- A.
“In a highly competitive marketplace, firms must be paranoid about the multitude of potential rivals.”
- B.
“You can afford to ignore rivals in small markets, but you can never ignore rivals in large markets, such as online video companies like YouTube.”
- C.
“There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix’s lunch. The challenge for a management team is to figure out which are real threats and which aren’t.”
- D.
“Netflix’s position is so strong that I don’t worry about new entrants.”
Correct Answer
C. “There are tens and maybe hundreds of start-ups who think that they are going to eat Netflix’s lunch. The challenge for a management team is to figure out which are real threats and which aren’t.”Explanation
The answer emphasizes the importance of recognizing and assessing potential threats from start-ups in the market. It highlights the need for a management team to distinguish between real threats and those that are not significant. This aligns with Hastings' observation about the competitive nature of the market and the need for firms to be cautious and vigilant in identifying and addressing potential rivals.Rate this question:
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- 17.
Appreciation of the U.S. dollar will have the following impact on McDonald’s:
- A.
Lower sales abroad because foreign customers cannot afford McDonald’s products.
- B.
More transfer of ingredients from the U.S. to branches abroad to take advantage of the higher dollar.
- C.
Lower profits, because foreign profits will be reduced when measured in dollars.
- D.
No impact at all.
Correct Answer
C. Lower profits, because foreign profits will be reduced when measured in dollars.Explanation
When the U.S. dollar appreciates, it means that its value increases compared to other currencies. This will lead to lower profits for McDonald's because when foreign profits are converted back to dollars, they will be reduced. As the value of the dollar increases, the amount of foreign currency that can be exchanged for each dollar decreases, resulting in lower profits for McDonald's. This is because the company's earnings from its international branches will be worth less when converted into dollars.Rate this question:
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- 18.
Cirrus aircraft, a leading manufacturer of small airplanes, sees a market opportunity and has decided to double its plant capacity over the next 2 years. What type of competitive action does this represent?
- A.
A tactical action because the move is an attempt to fill a gap in service
- B.
A strategic action because such a large plant expansion will require a major commitment of resources.
- C.
A strategic action because the firm can easily reverse the action at any time, thus giving Cirrus more strategic flexibility.
- D.
Botch B & C above.
Correct Answer
B. A strategic action because such a large plant expansion will require a major commitment of resources.Explanation
The correct answer is a strategic action because such a large plant expansion will require a major commitment of resources. This decision by Cirrus aircraft to double its plant capacity over the next 2 years is a significant and long-term commitment that will require substantial investments and resources. It is not a tactical action aimed at filling a gap in service, as it involves a much broader and more substantial expansion of the company's capabilities. Additionally, it is not a reversible action, as indicated by option C, as reversing such a large-scale expansion would likely be costly and disruptive.Rate this question:
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- 19.
Which of the following is not one of the characteristics of a contemporary control system?
- A.
It is a key catalyst for an ongoing debate about underlying data, assumptions, and action plans.
- B.
It must focus on constantly changing information that is strategically important.
- C.
It circumvents the need for face-to-face meetings among superiors, subordinates, and peers.
- D.
It generates information that is important enough to demand regular and frequent attention.
Correct Answer
C. It circumvents the need for face-to-face meetings among superiors, subordinates, and peers.Explanation
A contemporary control system must focus on constantly changing information that is strategically important and generate information that demands regular and frequent attention. However, it does not necessarily circumvent the need for face-to-face meetings among superiors, subordinates, and peers. Face-to-face meetings can still be important for effective communication, collaboration, and decision-making, even with the use of a control system.Rate this question:
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- 20.
The least effective way to retain human capital is _______________.
- A.
Encouraging employee identification with organizational missions and goals.
- B.
Requiring employees to sign agreements that prevent them from working for competitors in the future
- C.
Providing employees with a challenging and stimulating work environment
- D.
Providing employees with financial and non-financial rewards and incentives
Correct Answer
B. Requiring employees to sign agreements that prevent them from working for competitors in the futureExplanation
Requiring employees to sign agreements that prevent them from working for competitors in the future is the least effective way to retain human capital because it restricts employees' career opportunities and limits their potential for growth and development. It creates a sense of dissatisfaction and may lead to decreased motivation and engagement. Instead of fostering loyalty and commitment, such agreements can result in employees seeking opportunities elsewhere, ultimately resulting in a loss of valuable talent for the organization.Rate this question:
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- 21.
Divesting businesses can accomplish many different objectives. These include __________.
- A.
Enabling managers to focus their efforts more directly on the firm’s core businesses.
- B.
Providing the firm with more resources to spend on more attractive alternatives.
- C.
Raising cash to help fund existing businesses.
- D.
All of the above.
Correct Answer
D. All of the above.Explanation
Divesting businesses can accomplish many different objectives. By divesting non-core businesses, managers can focus their efforts more directly on the firm's core businesses, which can lead to improved performance and competitiveness. Divestment also provides the firm with more resources to spend on more attractive alternatives, such as investing in new technologies or expanding existing businesses. Additionally, divestment can raise cash that can be used to help fund existing businesses, providing them with the necessary financial support to thrive. Therefore, all of the given options are valid objectives that can be achieved through divestment.Rate this question:
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- 22.
Although general administration is often viewed only as overhead expense, it can become a source of competitive advantage. Examples include all of the following except ______________.
- A.
Negotiating and maintaining ongoing relations with regulatory bodies.
- B.
Effective information systems contributing significantly to a firm’s overall cost leadership strategy.
- C.
Marketing expertise increasing a firm’s revenues and enabling it to enter new markets.
- D.
Top management providing a key role in collaborating with important customers.
Correct Answer
C. Marketing expertise increasing a firm’s revenues and enabling it to enter new markets.Explanation
The correct answer is marketing expertise increasing a firm's revenues and enabling it to enter new markets. This is because the question asks for examples of general administration becoming a source of competitive advantage, and the other options provide examples of this. Negotiating and maintaining ongoing relations with regulatory bodies, effective information systems contributing to cost leadership, and top management collaborating with important customers all demonstrate how general administration can provide a competitive advantage. However, marketing expertise is not typically considered part of general administration and is more closely related to the marketing function of a firm.Rate this question:
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- 23.
High pressure for local adaptation combined with low pressure for lower costs would suggest what type of international strategy?
- A.
Global
- B.
Multidomestic
- C.
Transnational
- D.
Overall cost leadership
Correct Answer
B. MultidomesticExplanation
Multidomestic strategy is suggested by the combination of high pressure for local adaptation and low pressure for lower costs. This strategy focuses on customizing products and services to meet the specific needs of each local market while keeping costs low. By adapting to local preferences and conditions, the company can gain a competitive advantage in each market. This strategy allows for flexibility and responsiveness to local customer demands, making it suitable for industries where local differences are significant.Rate this question:
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- 24.
One of the reasons the Internet is eroding sustainable competitive advantage is __________.
- A.
Incumbent firms are entering market segments that they previously considered to be too small.
- B.
Nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.
- C.
Differentiators have been able to preserve the unique advantages that have always been the hallmark of their success.
- D.
Firms are ignoring opportunities to offer high-end services in niche markets.
Correct Answer
B. Nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.Explanation
As stated in the answer, nearly all competitors will have greater access to tools for managing costs, which makes it difficult for any one firm to achieve a competitive advantage. This means that the availability of cost management tools levels the playing field and reduces the ability for firms to differentiate themselves based on cost. Consequently, sustainable competitive advantage is eroded as firms struggle to stand out from their competitors.Rate this question:
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- 25.
Informational control systems ask ______________.
- A.
Is the organization “doing things right”?
- B.
Is the organization “doing the right things”?
- C.
Are rules and regulations being followed as information is processed?
- D.
Is the organization’s environment a necessary and sufficient condition for success?
Correct Answer
B. Is the organization “doing the right things”?Explanation
Informational control systems focus on evaluating whether the organization is "doing the right things." This means assessing whether the organization's actions and strategies align with its goals and objectives. It involves analyzing the effectiveness and efficiency of the organization's processes, decision-making, and resource allocation to ensure they are in line with the overall strategic direction. This type of control system helps management make informed decisions and adjustments to ensure the organization is on track to achieve its desired outcomes.Rate this question:
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- 26.
All of the following are the benefits of diversity in a firm’s workplace except ___________.
- A.
Creativity argument
- B.
Problem-solving argument
- C.
Resource acquisition argument
- D.
Similarity in Perspectives Argument
Correct Answer
D. Similarity in Perspectives ArgumentExplanation
The similarity in perspectives argument is not a benefit of diversity in a firm's workplace. Diversity brings together individuals with different backgrounds, experiences, and perspectives, which can lead to increased creativity and innovation. It also enhances problem-solving capabilities by bringing diverse viewpoints and approaches to the table. Additionally, diversity helps in resource acquisition as it allows the firm to tap into a wider talent pool and access different networks. However, the similarity in perspectives argument suggests that having a homogenous workforce with similar perspectives is beneficial, which is not true in the context of diversity.Rate this question:
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- 27.
All of the below are factors that affect how a competitor will respond to a competitive attack except _____________________.
- A.
How dependent the competitor is on that industry or particular market segment
- B.
The degree of market power and reputation of the company that initiated the attack
- C.
The resources which are available for a firm to respond.
- D.
The stock market reaction to the initial competitive attack.
Correct Answer
D. The stock market reaction to the initial competitive attack.Explanation
The stock market reaction to the initial competitive attack is not a factor that affects how a competitor will respond. The stock market reaction may have an impact on the company that initiated the attack, but it does not directly influence the competitor's response. Factors such as the competitor's dependence on the industry or market segment, the market power and reputation of the attacking company, and the resources available to the competitor are more relevant in determining their response.Rate this question:
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- 28.
All of the following are potential pitfalls of an integrated overall low cost and differentiation strategy except __________________.
- A.
Firms that fail to attain both strategies may end up with neither and become “stuck-in-the-middle.”
- B.
Targeting too large a market that causes unit costs to increase.
- C.
Underestimating the challenges and expenses associated with coordinating value-creating activities in the extended value chain.
- D.
Miscalculating sources of revenue and profit pools in the firm’s industry
Correct Answer
B. Targeting too large a market that causes unit costs to increase.Explanation
The correct answer is "Targeting too large a market that causes unit costs to increase." This is not a potential pitfall of an integrated overall low cost and differentiation strategy. In fact, targeting a larger market can often lead to economies of scale and lower unit costs. The other three options mentioned are potential pitfalls as they can hinder the successful implementation of an integrated low cost and differentiation strategy.Rate this question:
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- 29.
Vertical integration is attractive when _____________________.
- A.
Transaction costs are higher than internal administrative costs.
- B.
Internal administrative costs are higher than transaction costs.
- C.
Transaction costs and internal administrative costs are equal.
- D.
Search costs are higher than monitoring costs.
Correct Answer
A. Transaction costs are higher than internal administrative costs.Explanation
Vertical integration refers to the strategy of a company expanding its operations by acquiring or merging with other companies in the same industry, but at different stages of the supply chain. This allows the company to have more control over its inputs and outputs, reducing transaction costs such as negotiating prices, coordinating activities, and ensuring quality. If transaction costs, which are associated with buying from external suppliers, are higher than internal administrative costs, it makes sense for a company to vertically integrate. By bringing the production process in-house, the company can reduce transaction costs and have better control over its operations.Rate this question:
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- 30.
Industries in which proportionally more value is added in ___________ activities are more likely to benefit from a _____________ strategy.
- A.
Downstream; global
- B.
Upstream; multidomestic
- C.
Upstream; global
- D.
Manufacturing; multidomestic
Correct Answer
C. Upstream; globalExplanation
Industries in which proportionally more value is added in upstream activities are more likely to benefit from a global strategy. Upstream activities refer to the initial stages of production, such as sourcing raw materials and manufacturing components. By focusing on these activities, industries can gain a competitive advantage through cost savings, efficiency, and control over the supply chain. A global strategy allows companies to operate on a global scale, accessing larger markets, and taking advantage of economies of scale. This enables them to compete more effectively and achieve higher profitability.Rate this question:
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Mar 21, 2023Quiz Edited by
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Aug 02, 2010Quiz Created by
LeeTraylor
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