Managing in Complex Environments QUIZ #3Name: ____________________________Fall semester, 2009Professor Atkin My lecture time is: __________________This closed-book, closed-note quiz has 35 3-point questions to be answered on optical scansheets. To get a grade, you must return (a) the quiz and (b) the answer sheet. Good luck!1. If supply equals demand, then… Da. the observed price is the equilibrium price b. excess rents equal zeroc. both of the above d. none of the above2. In a perfect competition, shopping on price is equivalent to shopping on value. This is occurs because…Aa. prices are equilibrium prices and products are homogeneous b. both sellers and buyers are smallc. entry and exit in perfect competition is costlessd. long-term profits in a perfect competition = 03. Over the past several years, the University has increased tuition and observed an increase in students (and an increase in the quality of these students). Based on this observation we canreasonably conclude that…a. Pitt uses a entry barrier pricing objective Bb. a Pitt education is apparently price inelastic over the range observedc. high school seniors (and their parents) shop on priced. all of the above4. Assume two pizza parlors engaged in such extreme price competition that neither generates a profit. One owner increases price out of desperation, making the changes on signs and menus inside his shop. A day later the other owner also raises prices. Given just this information, we can reasonably conclude… Ca. that explicit collusion has likely occurredb. that the parties agreed before-hand to raise pricesc. both parties seek excess rents d. all of the above5. Excess rents are typically observed for premium-pricers but not for discounters. Ba. true b. false6. Assume that iTunes sells songs for $.99. Further assume it drops the price to $ .89 and observes an increase in quantity sold. Given just this information, we would expect that… Da. the new price policy is revenue enhancing b. the new price policy would decrease net incomec. both of the above d. none of the above 7. Excess rents usually imply that firms have… Ba. engaged in explicit collusion b. escaped perfect competition c. both of the above d. none of the above8. Assume firm A sets its price at P1 and generates demand of Q1. It then changes its policy, dropping price to P2, generating a greater demand Q2. From this we can reasonably conclude… Da. the two price policies are revenue neutralb. the firm uses a competition-based pricing strategyc. the firm has an entry barrier pricing objective d. none of the above9. Pricing below competition is an appropriate means to achieve market share objectives. Aa. true b. false10. Assume AT&T drops the price of breaking a mobile phone contract from $175 to $150, and a few days later T-mobile announces an identical move. This is an example of… Ca. defensive pricing b. signalingc. both of the above d. none of the above11. If a firm reaches breakeven, we can reasonably conclude that contribution margin > 0 Aa. true b. false12. If a firm reaches breakeven, we can reasonably conclude that breakeven quantity ≤ capacity. Aa. true b. false13. If price decreases, direct labor costs decrease, and direct material costs decrease, then contribution margin must also decrease. Ba. true b. false14. A standard assumption of breakeven analysis is that worker productivity changes linearly over the time period considered. Ba. true b. false15. If CM > 0, then the product is probably in its growth phase. Ba. true b. false16. Other things equal, the contribution margin increases if… Da. fixed cost decreases b. breakeven quantity decreasesc. both of the above d. none of the above 17. In “cost plus” pricing, the seller’s profit is independent of increases in raw material costs. Aa. true b. false18. Assume A and B are head-to-head rivals. Also assume both regularly earn excess rent. Givenjust this information our best guess is that both firms are competing in an oligopoly. Aa. true b. false19. Assume firm A has tried two pricing policies and determined that they are revenue neutral. From this we can reasonably conclude that the profit generated by both policies is more or less equal. Ba. true b. false20. Assume you are a brand manager. You know from experience that the market is very price sensitive and all rivals are fighting to increase share. Your boss has challenged you to increase contribution margin by 4-5% over the next year. Your first move is most likely to consider… Ca. increasing price b. decreasing fixed costsc. decreasing variable costs d. all three are equally appropriate21. Assume you are a brand manager. You know from experience that the market is very price sensitive and all rivals are fighting to increase share. Your boss has challenged you to decrease breakeven quantity by 4-5% over the next year. Which of the following could achieve this outcome? Da. increasing price b. decreasing fixed costsc. decreasing variable costs d. all three can help achieve this outcome22. Many restaurants in the Pittsburgh area routinely price wine at 2.5 times the cost of the wine. This is an example of… Ba. competition based pricing b. mark-up pricingc. both of the above d. none of the above23. T-Mobile is a German firm that also sells mobile phone services in the US. Assume they learnthat a particular promotion mix is very effective in Germany. Most likely the same mix will beeffective in the US market. Ba. true b. false24. Public relations can assist a firm… Da. building a new image b. reinforcing an existing imagec. repairing a tarnished image d. all of the above25. In class, I discussed my experience as the target of a promotion mix at a Mercedes dealership. As you should recall, I test drove a car, but did not purchase one. This suggests the campaign was not effective.a. true b. false B26. Assume market research learns that our firm’s target market is especially price sensitive. In this case the firm’s promotion mix should most probably emphasize… Aa. our low price b. our knowledgeable salespeoplec. our broad range of products d. our reputation for friendly service27. An effective promotion mix may increase a product’s brand