Strategic Management Practice Questions
Course Introduction
Strategic Management is a comprehensive course that explores the fundamental concepts, tools, and frameworks essential for crafting, implementing, and evaluating strategies within organizations. The course examines both the internal and external environments affecting businesses, including competitive dynamics, industry structure, and organizational resources. Students will learn how to analyze complex business situations, formulate strategic objectives, and make informed decisions to achieve long-term organizational goals in a rapidly changing global marketplace. Through real-world case studies, simulations, and collaborative projects, the course fosters critical thinking, leadership skills, and an in-depth understanding of how strategy drives success in diverse organizational settings.
Recommended Textbook
Managerial Economics and Strategy 1st Edition by Jeffrey M. Perloff
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17 Chapters
1600 Verified Questions
1600 Flashcards
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Page 2
Chapter 1: Introduction
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41 Verified Questions
41 Flashcards
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Sample Questions
Q1) A microeconomic model CANNOT be used to
A) evaluate the impact of a price change on a firm's revenue.
B) predict the impact of an increase in the minimum wage on unemployment.
C) evaluate the fairness of a proposal to nationalize health insurance.
D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets.
Answer: C
Q2) If actual experience supports two competing theories,then both theories are proven to be true.
A)True
B)False
Answer: False
Q3) If a model's predictions are correct,then
A) its assumptions must have been correct.
B) it is proven to be correct.
C) Both A and B above.
D) None of the above.
Answer: D
Q4) Give an example of a tradeoff a pizza restaurant might face.
Answer: Whether to make pepperoni or combination pizzas.
Page 3
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Chapter 2: Supply and Demand
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132 Flashcards
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Sample Questions
Q1) A market is said to "clear" when
A) sellers give up selling their goods because they can't find any buyers.
B) buyers and sellers are able to buy and sell as much as they want at the market price.
C) the government decides to shut it down.
D) sellers run out of goods to sell.
Answer: B
Q2) Consumers have been buying fewer CDs as downloadable music has become easier to purchase and use.We would represent this as
A) a leftward shift of the demand curve for CDs.
B) a rightward shift of the demand curve for CDs.
C) a change in the price of CDs.
D) a leftward shift of the supply curve for downloadable music.
Answer: A
Q3) A drought in the Midwest will raise the price of wheat because of a A) leftward shift in the supply curve.
B) rightward shift in the supply curve.
C) leftward shift in the demand curve.
D) rightward shift in the demand curve.
Answer: A
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Page 4
Chapter 3: Empirical Methods for Demand Analysis
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84 Verified Questions
84 Flashcards
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Sample Questions
Q1) In regression analysis,the dependent variable
A) is always quantity demanded.
B) is the variable whose variation is to be explained.
C) is one of the factors that explains what is happening with demand.
D) is represented by the inverse demand function.
Answer: B
Q2) If the price of orange juice rises 10%,and as a result the quantity demanded falls by 8%,the price elasticity of demand for orange juice is
A) -1.25.
B) -80.0.
C) -0.80.
D) -10.0.
Answer: C
Q3) Ramen noodles are likely considered
A) a normal good.
B) an inferior good.
C) to have inelastic demand.
D) to have perfectly elastic demand.
Answer: B
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Page 5
Chapter 4: Consumer Choice
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67 Flashcards
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Sample Questions
Q1) Clifford lives by the motto "Eat drink and be merry today,for tomorrow doesn't matter." If today's consumption is represented by "x" and tomorrow's consumption is represented by "y," then which of the following best represents Clifford's utility function?
A) U = x - y
B) U = x/y
C) U = x
D) U = y
Q2) Lisa eats both pizzas and burritos.If the price of a pizza increases,Lisa's opportunity set
A) becomes larger.
B) becomes smaller.
C) is unchanged.
D) cannot be determined without more information.
Q3) If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then
A) he would give up 5 pizzas to get the next salad.
B) he would give up 5 salads to get the next pizza.
C) he will eat five times as much pizza as salad.
D) he will eat five times as much salad as pizza.
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Page 6
Chapter 5: Production
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) The above figure shows the short-run production function for Albert's Pretzels.The average product of labor
A) increases first and then decreases.
B) decreases first and then increases.
C) decreases throughout.
D) increases throughout.
Q2) Returns to specialization can occur when
A) increasing the amount of labor allows individuals to specialize.
B) the exponents of the Cobb-Douglas production function are greater than 1.
C) a firm doubles its inputs.
D) the average cost curve is above the marginal costs curve.
Q3) Explain the difference between diminishing returns to labor and diminishing marginal returns to labor.
Q4) Which of the following market structures is likely to have the lowest productivity,given identical inputs?
A) oligopoly
B) monopsony
C) competitive
D) monopoly
Q5) Explain why labor might not always be a variable input.
Page 7
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Chapter 6: Costs
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Learning by doing,which leads to lower costs in the long run,is often
A) increased when new machinery is brought into the production process.
B) a function of cumulative output, that is producing more of the good or service.
C) improved through better use of computers in the production process.
D) not very important to most firms.
Q2) One problem with measuring a durable good's cost is
A) how to allocate the initial purchase cost.
B) how to account for depreciation of the good.
C) that the good may break before the end of its estimated useful life.
D) when to decide to throw it away for a newer model even if the cost has not been accounted for.
Q3) Fixed costs
A) are always sunk.
B) are avoidable.
C) are sometimes sunk.
D) sunk in the short run, but not in the long run.
Q4) "If the wage rate paid to one form of labor is twice the cost of another form of labor,the first type of labor must be twice as productive." Comment.
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Page 8
Chapter 7: Firm Organization and Market Structure
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70 Verified Questions
70 Flashcards
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Sample Questions
Q1) If the present value of all future revenue is positive,then
A) the firm should remain operating, even if it earns negative profit in the short run.
B) the firm should shut down if it is earning a negative profit in the short run.
C) the firm should shut down if it cannot cover its fixed costs in the short run.
D) Unable to determine with the information given.
Q2) If a firm cannot earn profits in the short run,it will shut down.
A)True B)False
Q3) The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than
A) $0.
B) $5.
C) $10.
D) $11.
Q4) If a firm doesn't make an economic profit it will shut down.
A)True
B)False
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9
Chapter 8: Competitive Firms and Markets
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97 Flashcards
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Sample Questions
Q1) Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?
A) p = MC
B) p = AC
C) profit = 0
D) All of the above.
Q2) Mister Jones was selling his house.The asking price was $220,000,and Jones decided he would take no less than $200,000.After some negotiation,Mister Smith purchased the house for $205,000.Smith's consumer surplus is
A) $5,000.
B) $15,000.
C) $20,000.
D) not able to be calculated from the information given.
Q3) If the market price is above a firm's average cost at the quantity produced
A) the firm operates and makes a profit.
B) the firm operates and make zero economic profit.
C) the market price of the firm's inputs will rise.
D) total profit is maximized.
Q4) When is the profit a firm earns equal to the producer surplus? Explain.
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Chapter 9: Monopoly
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81 Flashcards
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Sample Questions
Q1) Privatization of a state-owned monopoly can
A) allow governments to capture future producer surplus.
B) allow governments to be more efficient.
C) reduce bribery of government officials.
D) increases chances of reelection for politicians.
Q2) The monopoly can shift the demand for its product rightward by
A) accommodating entry.
B) advertising new uses for its product.
C) moving along the learning curve.
D) All of the above.
Q3) Which of the following statements is TRUE?
A) A monopoly cannot set price and quantity such that the point lies above the demand curve.
B) A monopoly can charge whatever it wants.
C) Profit maximization occurs by setting price first.
D) Both A and B.
Q4) Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.
A)True
B)False
Page 11
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Chapter 10: Pricing With Market Power
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) A mail-order clothing company offers a discount if customers purchase two shirts instead of only one.This is necessarily an example of quantity discrimination.
A)True
B)False
Q2) A perfect price discriminator
A) charges each buyer her reservation price.
B) charges different prices to each customer based upon different costs of delivery.
C) generates a deadweight loss to society.
D) charges lower prices to customers who buy greater quantities.
Q3) Which of the following is an example of peak-load pricing?
A) charging less for vacations to Hawaii during December and January
B) charging more for electricity on hot days
C) setting price equal to marginal cost when there is a capacity constraint
D) selling excess capacity at lower prices
Q4) Explain using welfare measures whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly.
Q5) Explain why a firm can earn more profit by price discrimination than from setting a uniform price.
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Chapter 12: Game Theory and Business Strategy
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) A Nash equilibrium occurs when
A) players choose their best strategy given the strategies chosen by others.
B) the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost.
C) a monopolist is forced to produce the efficient level of output.
D) oligopolists cooperate with each other.
Q2) Explain why it is unwise to bid more than your valuation of the good in a sealed bid second-price auction.
Q3) In game theory,we usually assume that all players
A) act rationally.
B) use the information available to them to decide on a best strategy.
C) know about the payoffs of the other players.
D) All of the above.
Q4) In the reality TV show Storage Wars,people bid on the contents of repossessed storage units without being able to evaluate the contents.This is an example of a ________ auction.
A) common value
B) private value
C) Dutch
D) second-price
Page 14
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Chapter 13: Strategies Over Time
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69 Verified Questions
69 Flashcards
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Sample Questions
Q1) If an incumbent faces an identical potential entrant with no costs of entry,the incumbent will
A) produce the Cournot duopolist level of output.
B) produce the Stackelberg leader level of output.
C) set price equal to marginal cost.
D) shut down.
Q2) Assume a firm is a monopoly and enjoys $10,000,000 profits per year.The firm lobbies to have a moratorium passed by Congress on new firms in its market for the next 25 years.If there is no discount rate,how much would the firm be willing to pay to deter entry?
A) $250 million
B) $25 million
C) $100 million
D) $250 billion
Q3) In the ultimatum game,one reason players don't choose the rational offer is
A) that there are too many possible outcomes to reasonably consider.
B) they are worse off by taking the offer.
C) they prefer to sacrifice to punish "unfair" behavior.
D) that it is not a Nash equilibrium.
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Page 15
Chapter 14: Managerial Decision-Making Under Uncertainty
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) A lottery game pays $500 with .001 probability and $0 otherwise.The variance of the payout is
A) 15.8.
B) 249.50.
C) 249.75.
D) 499.
Q2) If two events are positively correlated but not perfectly correlated,then
A) diversification is not necessary since there is no risk.
B) diversification eliminates all risk.
C) diversification does not reduce risk at all.
D) diversification can reduce risk.
Q3) For a risk-neutral person,the expected utility associated with various levels of wealth
A) is above the person's utility function.
B) is below the person's utility function.
C) is equal to the person's utility function.
D) does not exist.
Q4) A fair game is a game in which the chances are 50-50 that you win or lose.
A)True
B)False
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Chapter 15: Asymmetric Information
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) How can a warranty at the seller's expense signal that a product is of high quality?
Q2) Firms that seek to avoid hiring lazy workers that assert they are hardworking are trying to avoid
A) adverse selection.
B) moral hazard.
C) screening.
D) signaling.
Q3) If a principal and agent have an efficient contract,then A) one of them must be more risk-averse than the other.
B) neither can be made better off without harming the other.
C) they must have symmetric information.
D) the principal bears more of the risk.
Q4) Suppose a plaintiff hires a lawyer to represent her in a court case.The lawyer will be paid by the hour.Under this contract
A) efficiency is not achieved.
B) the client bears all of the risk.
C) the lawyer has an incentive to lie about his hours worked.
D) All of the above.
Q5) Explain how product liability laws can reduce adverse selection.
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Chapter 16: Government and Business
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) If a production process generates pollution,then a competitive market will produce more of the good than is socially optimal because
A) firms take all costs into consideration.
B) firms incur all costs of production but ignore some of them.
C) firms ignore the costs of production that they do not incur.
D) firms set price equal to social marginal cost.
Q2) Which of the following is likely protected by copyright?
A) your recipe for chocolate cake
B) your autobiography
C) the color scheme for your house
D) the names of your children
Q3) The above figure shows the market for steel ingots.An externality can be seen because
A) the social marginal cost exceeds the private marginal cost.
B) the private marginal cost exceeds the social marginal cost.
C) the optimal quantity of steel is zero.
D) not enough steel gets produced by the competitive market.
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18
Chapter 17: Global Business
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72 Flashcards
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Sample Questions
Q1) One of the major effects of trade liberalization has been
A) the liberal use of tariffs and quotas.
B) an increase in the use of beggar-thy-neighbor trade policies.
C) the globalization of supply chains.
D) an increase in the world price for most goods.
Q2) If the U.S.can produce pizza for $5 each and barrels of beer for $25 each,and Germany can produce pizza for $7 each and barrels of beer for $21 each,then
A) Germany has a comparative advantage in the production of beer.
B) Germany has an absolute advantage in the production of beer.
C) Germany has a comparative advantage in the production of pizza.
D) Germany has a comparative advantage in the production of beer and pizza.
Q3) The United States and many other countries often impose trade sanctions on other countries.These sanctions
A) decrease producer and consumer surplus in both the sanctioned and sanctioning countries.
B) tend to increase total welfare.
C) tend to decrease the deadweight loss.
D) tend to decrease consumer and producer surplus only in the sanctioned country.
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Page 19