Term Best Describes Quiz Questions

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Term Best Describes Quiz Questions - Quiz

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Questions and Answers
  • 1. 

    What term describes the situation where a firm does exceedingly well due to good luck or exceedingly poorly due to bad luck, but returns to normal performance following?

    • A.

      Regression to the mean

    • B.

      Competitive advantage

    • C.

      Persistent performer

    • D.

      Sustainable firm

    • E.

      Predictable performance

    Correct Answer
    A. Regression to the mean
    Explanation
    Regression to the mean is the term that describes the situation where a firm experiences exceptional success or failure due to luck, but eventually returns to its normal level of performance. This concept suggests that extreme outcomes are likely to be followed by more average or expected outcomes. In other words, a firm that has had an unusually good or bad performance is expected to revert back to its average performance over time.

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  • 2. 

    What Vonage do to deflect the impact of the intense price competition in the U.S.?

    • A.

      Attempted to position itself as the high-quality, high reliability player in the market

    • B.

      Raised its prices

    • C.

      Was acquired by Ebay

    • D.

      Began jointly providing service with cable companies

    • E.

      Replicate other firms on hardware and service features

    Correct Answer
    A. Attempted to position itself as the high-quality, high reliability player in the market
    Explanation
    Vonage attempted to position itself as the high-quality, high reliability player in the market to deflect the impact of intense price competition in the U.S. This means that Vonage focused on highlighting the superior quality and reliability of its services compared to its competitors. By doing so, Vonage aimed to differentiate itself and attract customers who valued these factors over price. This strategy allowed Vonage to compete effectively in the market and mitigate the negative effects of intense price competition.

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  • 3. 

    Which of the following is least likely a characteristic of profit persistence in an industry?

    • A.

      Entry barrier exist

    • B.

      Economic profits should quickly converge to zero

    • C.

      Barriers to imitation exist

    • D.

      Firms earning above-average profits today should continue to do so in the future

    • E.

      Low profits firms today should remain low-profit firms in the future

    Correct Answer
    B. Economic profits should quickly converge to zero
    Explanation
    Profit persistence refers to the ability of firms to sustain above-average profits over time. The given answer, "Economic profits should quickly converge to zero," is least likely to be a characteristic of profit persistence. This statement suggests that firms' profits will diminish rapidly and eventually reach zero, which contradicts the concept of profit persistence. In industries with profit persistence, firms are expected to continue earning above-average profits in the future, indicating that economic profits do not quickly converge to zero.

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  • 4. 

    Which of the following statements is least true with regards to Dennis Muller's study of profit persistence?

    • A.

      Muller's results suggests that firms with abnormally high levels of profitability tend, on average, to decrease in profitability over time

    • B.

      The profit rates of firms with abnormally high levels of profitability and firms with abnormally low levels of profitability will always converge to a common mean as the theory of perfect competition predicts

    • C.

      Muller's results suggests that firms with abnormally low levels of profitability tend, on average, to experiences increases in profitability over time

    • D.

      Firms that start out with high profits converge, in the long run, to rates of profitability that are higher than the rates of profitability of firms that starts out with low profits

    • E.

      Muller's work implies that market forces are a threat to profits, but only up to a point

    Correct Answer
    B. The profit rates of firms with abnormally high levels of profitability and firms with abnormally low levels of profitability will always converge to a common mean as the theory of perfect competition predicts
    Explanation
    This statement is least true because Muller's study suggests that firms with abnormally high levels of profitability tend, on average, to decrease in profitability over time. This contradicts the theory of perfect competition, which predicts that the profit rates of all firms, regardless of their initial levels of profitability, will converge to a common mean.

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  • 5. 

    What term best describes clusters of activities that a firm does especially well in comparison with other firms?

    • A.

      Competitive advantage

    • B.

      Resources

    • C.

      Capabilities

    • D.

      Threats to sustainability

    • E.

      Strategic firm assets

    Correct Answer
    C. Capabilities
    Explanation
    Capabilities best describes clusters of activities that a firm does especially well in comparison with other firms. Capabilities refer to the unique combination of resources, knowledge, skills, and processes that a firm possesses, which enable it to perform certain activities better than its competitors. These capabilities can be developed and leveraged to gain a competitive advantage in the market.

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  • 6. 

    What term best describes firm-specific assets such as patents and trademarks, brand-name reputation, installed base, and organizational culture?

    • A.

      Competitive advantage

    • B.

      Capabilities

    • C.

      Resources

    • D.

      Threats to sustainability

    • E.

      Strategic firm assets

    Correct Answer
    C. Resources
    Explanation
    Resources best describe firm-specific assets such as patents and trademarks, brand-name reputation, installed base, and organizational culture. Resources refer to the tangible and intangible assets that a firm possesses and can use to create value and gain a competitive advantage in the market. These assets can include physical resources like factories and equipment, as well as intangible resources like patents, trademarks, and brand reputation. By leveraging these resources effectively, a firm can differentiate itself from competitors and achieve sustainable success in the long run.

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  • 7. 

    What term describes a framework used in strategy based on resource heterogeneity which posits that for a competitive advantage to be sustainable, it must be underpinned by resource capabilities that are scarce and imperfectly mobile?

    • A.

      Persistence of profitability for the firm

    • B.

      Capability-based theory of the firm

    • C.

      Regression of the mean

    • D.

      Resource-based theory of the firm

    • E.

      Five-forces framework

    Correct Answer
    D. Resource-based theory of the firm
    Explanation
    The correct answer is Resource-based theory of the firm. This theory suggests that for a competitive advantage to be sustainable, it must be supported by resources that are scarce and not easily transferable or replicated by competitors. It emphasizes the importance of a firm's unique resources and capabilities in achieving and maintaining a competitive advantage in the long term.

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  • 8. 

    What term best describes a resource that cannot "sell itself" to the highest bidder?

    • A.

      Isolated

    • B.

      Value-creating

    • C.

      Scarce

    • D.

      Imperfectly mobile

    • E.

      Profit maximizing

    Correct Answer
    D. Imperfectly mobile
    Explanation
    Imperfectly mobile best describes a resource that cannot "sell itself" to the highest bidder. This term refers to a resource that is not easily transferable or adaptable to different uses or locations. It implies that the resource is limited in its ability to move or be traded freely in the market, making it less responsive to changes in demand and unable to maximize its value through competitive bidding.

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  • 9. 

    What best describes the reason superstar athlets (resources) capture most of the extra-value they create for a firm in the form of higher salaries rather than the firm capturing the extra value itself?

    • A.

      The athletes are not value-creating

    • B.

      The athletes are isolating mechanisms

    • C.

      The athletes are not cospeccialized

    • D.

      The athletes are not scarce

    • E.

      The athletes are imperfectly mobile

    Correct Answer
    C. The athletes are not cospeccialized
    Explanation
    The term "cospecialized" refers to the idea that the athletes possess unique skills or abilities that are difficult to replicate or replace. In this context, the explanation is suggesting that the reason superstar athletes capture most of the extra value they create for a firm in the form of higher salaries is because they are not cospecialized. This means that their skills are not easily duplicated or substituted by other individuals, making them more valuable and allowing them to negotiate higher salaries.

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  • 10. 

    What term best describes assets that are more valuable when used together than when separated?

    • A.

      Isolating

    • B.

      Value-creating

    • C.

      Imperfectly mobile

    • D.

      Scarce

    • E.

      Cospecialized

    Correct Answer
    E. Cospecialized
    Explanation
    Cospecialized is the term that best describes assets that are more valuable when used together than when separated. This means that these assets have a synergistic effect when combined, resulting in higher value compared to when they are used individually. The term "cospecialized" implies a close interdependence and mutual reliance between the assets, highlighting the importance of their joint utilization.

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  • 11. 

    What term coined by Richard Rumlet refers to economic forces that limit the extent to which a competitive advantage can be duplicated or neutralized through resource-creation activities of other firms?

    • A.

      Capability-based theory of the firm

    • B.

      Resource-based theory of the firm

    • C.

      Early-mover advantages

    • D.

      Impediments to imitation

    • E.

      Isolating mechanisms

    Correct Answer
    E. Isolating mechanisms
    Explanation
    Isolating mechanisms refers to the term coined by Richard Rumlet that refers to economic forces that limit the extent to which a competitive advantage can be duplicated or neutralized through resource-creation activities of other firms. It suggests that there are certain mechanisms or barriers that prevent other firms from imitating or replicating a firm's competitive advantage, thereby protecting the firm's position in the market. These isolating mechanisms can include factors such as patents, copyrights, unique capabilities, brand reputation, or exclusive access to resources, which make it difficult for competitors to imitate or neutralize the advantage.

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  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jun 17, 2012
    Quiz Created by
    Orsay
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