WPC 480 EXAM QUESTIONS AND ANSWERS
LATEST UPDATE (ALREADY GRADED A+)
How does a firm capture its producer surplus for a good or service?
a. as market price per share
b. as earnings per share
c. as cost per unit sold
d. as profit per unit sold
d
The difference between the price charged for a product (P), and the cost to produce it (C), is the
producer surplus. Firms capture this amount as profit per unit sold.
Which of the following is a disadvantage of the balanced-scorecard approach?
a. It fails to translate the vision into measureable operational goals.
b. It provides limited guidance for designing and planning business processes.
c. It fails to link the strategic vision to responsible parties within the organization.
d. It provides limited guidance about which metrics to choose.
d
The balanced-scorecard approach provides only limited guidance about which metrics to choose.
Different situations call for different metrics.
You are the CEO of a home appliance manufacturing company and have recently undertaken a review
of your company's strategy. In comparing your stock market valuation to that of your closest
competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued
at $40 billion. How should you proceed?
a. Compare the current valuations with past valuations to determine a trend.
b. Assume your current strategy has failed and begin to formulate a new one.
c. Consider this evidence of a sustainable competitive advantage and maintain your current strategy.
d. Compare your valuation to firms in another industry.
a
When assessing and evaluating competitive advantage, a comparison of rival firms' share price
development or market capitalization provides a helpful yardstick when used over the long term. In
order for this comparison of market capitalization to yield useful information, you must consider how it
has changed over time. If your competitor has seen significant growth in market cap over the preceding
year while your firm has seen its valuation decline slightly, for example, you would have evidence that
your firm has begun to lose its competitive advantage.
Competitive advantage goes to the firm that achieves the
a. largest economic value created.
b. highest payable turnover.
, c. highest Cost of goods sold/Revenue ratio.
d. lowest producer surplus.
a
Competitive advantage goes to the firm that achieves the largest economic value created, which is the
difference between V, the consumer's willingness to pay, and C, the cost to produce the good or service.
________ is best described as a measure of how effectively capital is being used by a firm to generate
revenue.
a. Working capital turnover
b. Return on revenue
c. Revenue per employee
d. Risk capital
a
A component of return on invested capital is working capital turnover, which is a measure of how
effectively capital is being used by a firm to generate revenue.
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym
facilities for 12 months by paying only for 10 months. Included in the package are two health checkups
and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance
the perceived value of the service offerings. In this case, Body Sync's primary value driver is
a. learning-curve effects.
b. experience-curve effects.
c. availability of complements.
d. economies of scale.
c
Body Sync's primary value driver is availability of complements. Complements add value to a product or
service when they are consumed in tandem. Finding complements, therefore, is an important task for
managers in their quest to enhance the value of their offerings.
While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures
a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per
pair. Which of the following statements is true in this scenario?
a. Highwire has a higher opportunity cost than Fun Frames.
b. Fun Frames and Highwire have achieved differentiation parity.
c. Fun Frames is a cost-leader when compared to Highwire.
d. Fun Frames has created a greater economic value than Highwire.
b
A firm achieves differentiation parity when it creates the same perceived value as its rival firm.
________ is best described as decreases in cost per unit as output increases.
a. Time compression economies
b. Economies of scope
c. Economies of replication
d. Economies of scale
LATEST UPDATE (ALREADY GRADED A+)
How does a firm capture its producer surplus for a good or service?
a. as market price per share
b. as earnings per share
c. as cost per unit sold
d. as profit per unit sold
d
The difference between the price charged for a product (P), and the cost to produce it (C), is the
producer surplus. Firms capture this amount as profit per unit sold.
Which of the following is a disadvantage of the balanced-scorecard approach?
a. It fails to translate the vision into measureable operational goals.
b. It provides limited guidance for designing and planning business processes.
c. It fails to link the strategic vision to responsible parties within the organization.
d. It provides limited guidance about which metrics to choose.
d
The balanced-scorecard approach provides only limited guidance about which metrics to choose.
Different situations call for different metrics.
You are the CEO of a home appliance manufacturing company and have recently undertaken a review
of your company's strategy. In comparing your stock market valuation to that of your closest
competitor, you note that your firm is currently valued at $50 billion, while your competitor is valued
at $40 billion. How should you proceed?
a. Compare the current valuations with past valuations to determine a trend.
b. Assume your current strategy has failed and begin to formulate a new one.
c. Consider this evidence of a sustainable competitive advantage and maintain your current strategy.
d. Compare your valuation to firms in another industry.
a
When assessing and evaluating competitive advantage, a comparison of rival firms' share price
development or market capitalization provides a helpful yardstick when used over the long term. In
order for this comparison of market capitalization to yield useful information, you must consider how it
has changed over time. If your competitor has seen significant growth in market cap over the preceding
year while your firm has seen its valuation decline slightly, for example, you would have evidence that
your firm has begun to lose its competitive advantage.
Competitive advantage goes to the firm that achieves the
a. largest economic value created.
b. highest payable turnover.
, c. highest Cost of goods sold/Revenue ratio.
d. lowest producer surplus.
a
Competitive advantage goes to the firm that achieves the largest economic value created, which is the
difference between V, the consumer's willingness to pay, and C, the cost to produce the good or service.
________ is best described as a measure of how effectively capital is being used by a firm to generate
revenue.
a. Working capital turnover
b. Return on revenue
c. Revenue per employee
d. Risk capital
a
A component of return on invested capital is working capital turnover, which is a measure of how
effectively capital is being used by a firm to generate revenue.
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym
facilities for 12 months by paying only for 10 months. Included in the package are two health checkups
and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance
the perceived value of the service offerings. In this case, Body Sync's primary value driver is
a. learning-curve effects.
b. experience-curve effects.
c. availability of complements.
d. economies of scale.
c
Body Sync's primary value driver is availability of complements. Complements add value to a product or
service when they are consumed in tandem. Finding complements, therefore, is an important task for
managers in their quest to enhance the value of their offerings.
While Fun Frames incurs a cost of $12 for a pair of eyeglasses, Highwire, its competitor, manufactures
a pair of glasses at $10. Both the companies are able to sell their glasses for a maximum of $30 per
pair. Which of the following statements is true in this scenario?
a. Highwire has a higher opportunity cost than Fun Frames.
b. Fun Frames and Highwire have achieved differentiation parity.
c. Fun Frames is a cost-leader when compared to Highwire.
d. Fun Frames has created a greater economic value than Highwire.
b
A firm achieves differentiation parity when it creates the same perceived value as its rival firm.
________ is best described as decreases in cost per unit as output increases.
a. Time compression economies
b. Economies of scope
c. Economies of replication
d. Economies of scale
