MGMT 441 Exam 1 Test Bank – Study Guide, Practice Questions &
Exam Review
The greater the extent to which a firm's assumptions and hypotheses accurately describe how
the competition in the industry is likely to evolve, and how that evolution can be exploited to
earn a profit, the more likely it is that a firm will gain a competitive advantage from
implementing its strategies: True/False - ✔✔True
Suppliers are a greater threat to firms in an industry when suppliers are threatened by
substitutes: True/False - ✔✔False
The cost of equity is equal to the interest a firm must pay its debt holders in order to induce
those debt holders to lend money to the firm: True/False - ✔✔False
A resource can be a source of competitive advantage even if the resource is controlled by
numerous firms: True/False - ✔✔False
A process is said to be path dependent when imitating firms are not able to understand the
relationship between the resources and capabilities controlled by a firm and that firm's
competitive advantage: : True/False - ✔✔False
A firm's patents may decrease, rather than increase, the costs of imitation: True/False -
✔✔True
The threat of rivalry tends to be high in an industry when firms are able to meaningfully
differentiate their products: True/False - ✔✔False
If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage
firm were to open its own diamond brokerage firm, this would be an example of forward
vertical integration: True/False - ✔✔False
, Within the five forces framework, when all five threats are very high competition in the industry
begins to approach a monopoly: True/False - ✔✔False
To a firm seeking competitive advantage, an environmental threat is any individual, group, or
organization outside a firm that seeks to reduce the level of that firm's performance: True/False
- ✔✔True
If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%,
Thermacorp is said to have A) below average accounting performance. B) above average
economic performance. C) above average accounting performance. D) below average economic
performance. - ✔✔B
The values, beliefs and norms that guide behavior in society are known as A) climate. B)
demographics. C) economics. D) culture. - ✔✔D
Firms in industries characterized by ________ can expect to earn only competitive parity. A)
perfect competition B) monopolistic competition C) oligopoly D) monopoly - ✔✔A
All other things being equal, which of the following would lead to lower barriers to entry in an
industry? A) The existence of economies of scale in the industry B) Products are highly
differentiated in the industry. C) Industry incumbents have learning-curve cost advantages. D)
Raw materials are widely and readily available at a competitive price. - ✔✔D
15. The advantages that come to firms that make important strategic and technological
decisions early in the development of an industry are known as ________ advantages. A) first-
mover B) competitive C) early-entrant D) first-comer - ✔✔A
LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology
that allows its customers to manufacture their products more precisely with a higher level of
consistency and at a lower cost than they could previously. LaserTech's executives believe that
Exam Review
The greater the extent to which a firm's assumptions and hypotheses accurately describe how
the competition in the industry is likely to evolve, and how that evolution can be exploited to
earn a profit, the more likely it is that a firm will gain a competitive advantage from
implementing its strategies: True/False - ✔✔True
Suppliers are a greater threat to firms in an industry when suppliers are threatened by
substitutes: True/False - ✔✔False
The cost of equity is equal to the interest a firm must pay its debt holders in order to induce
those debt holders to lend money to the firm: True/False - ✔✔False
A resource can be a source of competitive advantage even if the resource is controlled by
numerous firms: True/False - ✔✔False
A process is said to be path dependent when imitating firms are not able to understand the
relationship between the resources and capabilities controlled by a firm and that firm's
competitive advantage: : True/False - ✔✔False
A firm's patents may decrease, rather than increase, the costs of imitation: True/False -
✔✔True
The threat of rivalry tends to be high in an industry when firms are able to meaningfully
differentiate their products: True/False - ✔✔False
If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage
firm were to open its own diamond brokerage firm, this would be an example of forward
vertical integration: True/False - ✔✔False
, Within the five forces framework, when all five threats are very high competition in the industry
begins to approach a monopoly: True/False - ✔✔False
To a firm seeking competitive advantage, an environmental threat is any individual, group, or
organization outside a firm that seeks to reduce the level of that firm's performance: True/False
- ✔✔True
If the average ROE in the heating and cooling industry is 10.1%, and Thermacorp's ROE is 17.3%,
Thermacorp is said to have A) below average accounting performance. B) above average
economic performance. C) above average accounting performance. D) below average economic
performance. - ✔✔B
The values, beliefs and norms that guide behavior in society are known as A) climate. B)
demographics. C) economics. D) culture. - ✔✔D
Firms in industries characterized by ________ can expect to earn only competitive parity. A)
perfect competition B) monopolistic competition C) oligopoly D) monopoly - ✔✔A
All other things being equal, which of the following would lead to lower barriers to entry in an
industry? A) The existence of economies of scale in the industry B) Products are highly
differentiated in the industry. C) Industry incumbents have learning-curve cost advantages. D)
Raw materials are widely and readily available at a competitive price. - ✔✔D
15. The advantages that come to firms that make important strategic and technological
decisions early in the development of an industry are known as ________ advantages. A) first-
mover B) competitive C) early-entrant D) first-comer - ✔✔A
LaserTech is a manufacturer of industrial lasers and has developed a new, patented technology
that allows its customers to manufacture their products more precisely with a higher level of
consistency and at a lower cost than they could previously. LaserTech's executives believe that
