Texas A&M International University

ECO 3320

CHAPTER 10

1)Firms maintain their completive edge by

1. 1. Providing a good at lower costs than their rivals

1. 2. Providing a superior product at the same cost as your rival
   3. Being innovative
   4. All the above

2. Apple continues to be innovative to ensure that their demand curve stays or becomes
   1. More inelastic
   2. More elastic
   3. Unitary elastic
   4. None of the above

3. The resource-based view indicates that firms exhibit different performances within the same industry because
   1. there is less buyer power
   2. there are economies of scale present
   3. some firms have superior resources
   4. there is less competition AND: C

4. Supplier power tends to be low when
   1. Suppliers are less concentrated
   2. Inputs provided by the supplier are not vital
   3. Inputs are less differentiated
   4. All the above

5. All these increase differentiation, except
   1. Product branding
   2. Reducing quality
   3. Advertising
   4. Limiting availability

6. For a firm to reduce competitive intensity, it should
   1. Enact barrier to entry
   2. Lobby to the government
   3. Acquire patents
   4. All the above

7. What are the different methods to measure industry concentration?
   1. Four-firm concentration ratio.
   2. HHI index.
   3. Total output
   4. a and b only

8. An industry with a high four-firm concentration ratio implies
   1. firms have high supplier power
   2. firms have low supplier power
   3. buyers have a high supplier power
   4. buyers have a low supplier power

9. What is the 4-firm concentration ratio of an industry with 25 firms each having an equal market share?

a) .16.

b) .24.

c) .20.

d) .12.

10. Which of these firms have a low supplier power?
    1. Pharmaceutical firms
    2. Semiconductor firms
    3. Car Dealerships
    4. Software firms

11. To stay one step ahead of the forces of competition, a firm can adopt one of these strategies except
    1. Cost reduction
    2. Product differentiation
    3. Advertising
    4. Reduction in the intensity of competition

12. The industrial organization economics perspective assumes that the industry

                                    is the most important determinant of long-run profitability.

1. 1. Structure
   2. Conduct
   3. Performance
   4. None of the above

13. The five forces model is a framework
    1. For increasing buyer force in the market
    2. For improving competition in the industry
    3. For analyzing the attractiveness of an industry
    4. Of matching resources and capabilities of the firm

14. Attractive industries have all the following, except
    1. High supplier power
    2. Low buyer power

1. 3. High entry barriers
   4. Low rivalry

15. Low cost strategies are usually found in industries where
    1. Products are not particularly differentiated
    2. Price competition tends to be fierce
    3. Both a and b
    4. None of the above

16. Cost-reduction generate
    1. Increases in long-run profitability
    2. Increases in long-run profitability only if the cost reduction is difficult to imitate
    3. Increases in product differentiation
    4. Reduction in competitive intensity

17. The industrial organization economics perspective locates the source of advantage at the
    1. Individual firm level
    2. Industry level
    3. Both a and b
    4. None of the above

18. The resource based view locates the source of advantage at the
    1. Individual firm level
    2. Industry level
    3. Both a and b
    4. None of the above

19. Which of the following is true?
    1. Industry structure determines firm conduct which in turn determines firms’ performance
    2. Industry structure determines firm performance which in turn determines firms’

conduct

1. 3. Industry conduct determines firm structure which in turn determines firms’ performance
   4. Industry performance determines firm conduct which in turn determines firms’

structure

20. Typical structure characteristics of interest to Industrial Organization researchers include
    1. Barriers to entry
    2. Product differentiation among firms
    3. The number and size distribution of firms
    4. All of the above