Chapter 7 Excercise Quest

Chapter 7 Excercise Quest

Chapter 7 Excercise QuestionsISBN-13 : 978-0-618-9886-41) Does a firm make use of comparative advantage in allocating its resources? What factors give a firm a comparative advantage?2) Under what conditions are the two strategies of low cost and high quality a trade-off? Under what conditions would the efficient frontier not be an appropriate picture of the two strategies?3) What is the best practices frontier? How does this relate to competitive advantage?4) Why is growth a primary strategy of almost every firm? Would it ever make sense to “stand pat”. Use the economic profit equation to provide an answer.5) Jack Welch is heralded as a great leader of General Electric (GE). His strategy to acquire companies in different lines of business based on the requirement that each business in GE was to become the #1 or #2 competitor in the indistry is touted as being particulary brillant. While very successful, could there have been a fundemental flaw in Welch’s strategy?7) How is national strategy different firm firm strategy? How are the two the same?8) Use what you know about Starbucks and apply the VRIO/VRIN approach to evaluate Starbucks, as you know it. Use the five forces model to evaluate Starbucks. Is the five forces model different from the VRIO model? Explain.10)Texas Instruments are once announced a price for random-access memories that wouldn’t be available until two years after the announcement. A few days later, Bowmar announced that it would produce this product and sell it a lower price than Texas Instruments. A few weeks later, Motorols said it, too, would produce this product and sell it below the Bowmar price. A few weeks after this, Texas Instrments Announced a price that was one-half of Motorola’s. The other two firms announced that, after reconsidering their decision, they would not produce the product. What do you think was Texas Instruments reason for announcing the price of a product two years before it was actually for sale?11) Explain how a strategy of increasing expenditures on advertising could deter market entry.12) Coke and Pepsi have sustained their market dominance for nearly a century. General Motors and Ford have lost their dominance. What is the difference between the two cases.13) Currently, a fast-food firm has a monopoly in the university student union. The monopoly pays the university $75,000 a year in order to maintain it. The firm earns an economic profit of $290,000 per year. Another fast food firm wants to enter the market and offer its fare to students. The manager of the first firm calls the university president asking her to maintain the first firms monopoly. How much would the first firm be willing to pay to keep the monopoly?14) A first mover is dominating a market, with revenues of $40 million annually. The average total cost of the firm is #02 million, of which $19 million is fixed. How can the first move keep others from entering the market?15) When would limit pricing make sense? What price should serve as the limit?17) Explain the differences between perfect competition, monopoly, monopolistic competitoin, and oligopoly.18) Why would a firm want to deter entry? How much would a monopolist spend to keep other firms out of its market?19) Explain why predatory pricing hardly works in the real world.

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