BUS 189 FINAL EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Every product has a given absolute value. - Answers False
A demand curve is... - Answers -Downward sloping
-An descending rank ordering of peoples' willingness to pay
For any given price, a demand curve will predict how many buyers for the product there will be. -
Answers True
A demand curve is a graph of profit with quantity - Answers False
-A demand curve is a graph of price with quantity
Gross profit can be predicted from a demand curve... - Answers by multiplying price less cost by
quantity
In the Value-Price-Cost model, the difference between price and cost is - Answers -Firm profit
-Value appropriated by the seller (or producer)
In the Value-Price-Cost model, the difference between value and price is - Answers -Consumer
surplus
-Value appropriated by the buyer
In the Value-Price-Cost model, the difference between value and cost is - Answers -Value created
-Value added
-Value appropriated by the seller (or producer) AND the value appropriated by the buyer
Assuming rationality, in a voluntary market exchange a seller is better off after the transaction than
they were before, but the buyer is not. - Answers False
-If the exchange in voluntary, both parties benefit from the exchange.
Cournot (the 19th century French economist) showed theoretically that - Answers -As industry
concentration increases, prices rise
-The number of firms in an industry is negatively related to price
In Cournot's model of oligopolistic competition, two firms segment the market (note the model can
be extended to more than two firms). - Answers False
In Cournot's model of oligopolistic competition, assuming their unit costs are the same, both firms -
Answers -Make the same profit
-Sell the same quantity
-Sell a commodity product
Cournot's model connects industry concentration to industry profitability. - Answers True
Cournot's model is central to which other piece of theory? - Answers Porter's 5 forces
Selling a single product variant... - Answers -means setting a single price
-Does not meet all buyers' needs
-Leaves may buyers with a "surplus"
Price discrimination means - Answers -setting prices that exactly match buyers' willingness to pay
-setting prices to leave no consumer surplus
Setting a single profit maximizing price means that - Answers -many of those who buy the product
paid less than they were prepared to
-the firm's profit is maximized
Which of the following car companies is a price cost leader?
Audi
Fiat
Ferrari
Koenigsegg
Lamborghini
Mclaren
Pagani
Volks Wagen - Answers None of the companies are cost leaders
Which of the following car companies is implementing a full line differentiation strategy?
Audi
Fiat
Ferrari
Koenigsegg
, Lamborghini
Mclaren
Pagani
Volks Wagen - Answers -Fiat
-Volks Wagen
-VW owns a wide range of companies including Porsche and Audi which itself owns Lamborghini.
Fiat owns Ferrari, Maserati, Alfa Romeo, Lancia, Chrysler and Dodge.
As the ultimate corporate parents of the companies listed, these are the companies that can be said
to be pursuing full line differentiation.
Which of the following car companies is part of a niche strategy?
Audi
Fiat
Ferrari
Koenigsegg
Lamborghini
Mclaren
Pagani
Volks Wagen - Answers -Mclaren
-Pagani
-Koenigsegg
-A niche strategy is like one of the two generic strategies but restricted to one part of the market
rather than the entire market.
-A maker of exotic sports cars like Mclaren (Links to an external site.) (which grew out of F1 team
started by Bruce Mclaren in 1963), Pagani (Links to an external site.) or Koenigsegg (Links to an
external site.) are niche players, selling products only to a very small segment (measure by numbers
of buyers) of the total automobile market.
When should a differentiation strategy be pursued? - Answers -if the value that buyers place on a
product, is strongly related to matching segment tastes
-when customers are willing to pay a premium for a product that almost exactly meets their
requirements, prices can often be raised in excess of these higher costs
-When production costs rise more steeply than the value customers attribute to that variety
When should a cost-leadership strategy be pursued? - Answers -if buyers in different segments do
not place much value on a product matching their criteria
-If buyers willingness to isn't much affected by producing a product that exactly meets their needs
(relatively to one that mostly does) differentiation may be unprofitable
Reducing product variety leads to - Answers Greater economies of scale and lower costs
Differentiation - Answers -offering them almost exactly the product they are looking for
-is generally costly since economies of scale decline with a proliferation of product variants
Cost-leadership - Answers -costs can be driven down by producing just one kind of product
-Reducing product variety leads to greater economies of scale and lower costs mean that profits are
still possible when prices are lowered; as they have to be to attract customers who may not think that
a one-size-fits-all product is ideal but who appreciate that they can get it for a relatively low price.
When buyers cannot easily be segmented and care little about minor differences in the product it is a
_____________ product, the best approach would be a _____________ strategy.
When production costs rise more steeply than the value customers attribute to that variety,
differentiation is the preferred strategy. - Answers -cheap
-cost-leadership
When production costs rise less steeply than the value customers attribute to that variety,
_____________ is the preferred strategy. - Answers -differentiation
In the past, many firms have failed because... - Answers they produced neither enough variants to
satisfy all the market segments, and did not produce enough of each variant to get meaningful
economies of scale
A company might be "stuck in the middle" if... - Answers it produces too few model variants to meet
each segment's needs and too many to gain much n the way of economies of scale
Every product has a given absolute value. - Answers False
A demand curve is... - Answers -Downward sloping
-An descending rank ordering of peoples' willingness to pay
For any given price, a demand curve will predict how many buyers for the product there will be. -
Answers True
A demand curve is a graph of profit with quantity - Answers False
-A demand curve is a graph of price with quantity
Gross profit can be predicted from a demand curve... - Answers by multiplying price less cost by
quantity
In the Value-Price-Cost model, the difference between price and cost is - Answers -Firm profit
-Value appropriated by the seller (or producer)
In the Value-Price-Cost model, the difference between value and price is - Answers -Consumer
surplus
-Value appropriated by the buyer
In the Value-Price-Cost model, the difference between value and cost is - Answers -Value created
-Value added
-Value appropriated by the seller (or producer) AND the value appropriated by the buyer
Assuming rationality, in a voluntary market exchange a seller is better off after the transaction than
they were before, but the buyer is not. - Answers False
-If the exchange in voluntary, both parties benefit from the exchange.
Cournot (the 19th century French economist) showed theoretically that - Answers -As industry
concentration increases, prices rise
-The number of firms in an industry is negatively related to price
In Cournot's model of oligopolistic competition, two firms segment the market (note the model can
be extended to more than two firms). - Answers False
In Cournot's model of oligopolistic competition, assuming their unit costs are the same, both firms -
Answers -Make the same profit
-Sell the same quantity
-Sell a commodity product
Cournot's model connects industry concentration to industry profitability. - Answers True
Cournot's model is central to which other piece of theory? - Answers Porter's 5 forces
Selling a single product variant... - Answers -means setting a single price
-Does not meet all buyers' needs
-Leaves may buyers with a "surplus"
Price discrimination means - Answers -setting prices that exactly match buyers' willingness to pay
-setting prices to leave no consumer surplus
Setting a single profit maximizing price means that - Answers -many of those who buy the product
paid less than they were prepared to
-the firm's profit is maximized
Which of the following car companies is a price cost leader?
Audi
Fiat
Ferrari
Koenigsegg
Lamborghini
Mclaren
Pagani
Volks Wagen - Answers None of the companies are cost leaders
Which of the following car companies is implementing a full line differentiation strategy?
Audi
Fiat
Ferrari
Koenigsegg
, Lamborghini
Mclaren
Pagani
Volks Wagen - Answers -Fiat
-Volks Wagen
-VW owns a wide range of companies including Porsche and Audi which itself owns Lamborghini.
Fiat owns Ferrari, Maserati, Alfa Romeo, Lancia, Chrysler and Dodge.
As the ultimate corporate parents of the companies listed, these are the companies that can be said
to be pursuing full line differentiation.
Which of the following car companies is part of a niche strategy?
Audi
Fiat
Ferrari
Koenigsegg
Lamborghini
Mclaren
Pagani
Volks Wagen - Answers -Mclaren
-Pagani
-Koenigsegg
-A niche strategy is like one of the two generic strategies but restricted to one part of the market
rather than the entire market.
-A maker of exotic sports cars like Mclaren (Links to an external site.) (which grew out of F1 team
started by Bruce Mclaren in 1963), Pagani (Links to an external site.) or Koenigsegg (Links to an
external site.) are niche players, selling products only to a very small segment (measure by numbers
of buyers) of the total automobile market.
When should a differentiation strategy be pursued? - Answers -if the value that buyers place on a
product, is strongly related to matching segment tastes
-when customers are willing to pay a premium for a product that almost exactly meets their
requirements, prices can often be raised in excess of these higher costs
-When production costs rise more steeply than the value customers attribute to that variety
When should a cost-leadership strategy be pursued? - Answers -if buyers in different segments do
not place much value on a product matching their criteria
-If buyers willingness to isn't much affected by producing a product that exactly meets their needs
(relatively to one that mostly does) differentiation may be unprofitable
Reducing product variety leads to - Answers Greater economies of scale and lower costs
Differentiation - Answers -offering them almost exactly the product they are looking for
-is generally costly since economies of scale decline with a proliferation of product variants
Cost-leadership - Answers -costs can be driven down by producing just one kind of product
-Reducing product variety leads to greater economies of scale and lower costs mean that profits are
still possible when prices are lowered; as they have to be to attract customers who may not think that
a one-size-fits-all product is ideal but who appreciate that they can get it for a relatively low price.
When buyers cannot easily be segmented and care little about minor differences in the product it is a
_____________ product, the best approach would be a _____________ strategy.
When production costs rise more steeply than the value customers attribute to that variety,
differentiation is the preferred strategy. - Answers -cheap
-cost-leadership
When production costs rise less steeply than the value customers attribute to that variety,
_____________ is the preferred strategy. - Answers -differentiation
In the past, many firms have failed because... - Answers they produced neither enough variants to
satisfy all the market segments, and did not produce enough of each variant to get meaningful
economies of scale
A company might be "stuck in the middle" if... - Answers it produces too few model variants to meet
each segment's needs and too many to gain much n the way of economies of scale
