Q&A Hero

Q: Which arrangement is best undertaken when a firm wants to keep its seasonal distribution channels functioning throughout the year? A) price skimming B) using the services of a trading company C) establishing a retail store D) using the services of an export management company E) complementary marketing

Q: The process of discounting or finding the present value of a cash flow to be received in the future is really the reverse of compounding. a. True b. False

Q: A curve where every combination of the two goods being considered yields the same level of satisfaction is known asA) a marginal utility curve. B) a total utility curve. C) an indifference curve. D) a budget constraint.

Q: A major goal of the Export Trading Company (ETC) Act was to A) allow U.S. companies to bypass tax laws with respect to international trading. B) remove antitrust disincentives to export activities in the U.S.. C) bypass trade barriers in foreign countries. D) earn the highest possible profits in foreign countries. E) combine export shipments within single containers.

Q: Disregarding risk, if money has time value, the future value of some amount of money always will be more than the amount originally invested, and the present value of some amount to be received in the future is always less than that future amount to be received. a. True b. False

Q: If marginal utility is positive but decreasing, total utility isA) decreasing. B) negative. C) increasing. D) constant.

Q: ________ offer one of the easiest routes to gain entrance into the complicated Japanese distribution system because they virtually control distribution through all levels of channels in Japan. A) Trade representatives B) Trading companies C) Brokers D) Export management companies E) Complementary marketers

Q: Cash flow time lines are used primarily for decisions involving paying off debt or investing in financial securities. They cannot be used when making decisions about investments in physical assets. a. True b. False

Q: Compared to the long-run absolute elasticity of demand, the short-run absolute elasticity of demand isA) smaller. B) the same. C) larger.D) either smaller or larger, depending on other factors.

Q: A major disadvantage of ________ is that they can seldom afford to make the kind of market investment needed to establish deep distribution for products. A) export management companies B) trading companies C) import associations D) global retailers E) complementary marketers

Q: Benefits of the post-audit include all of the following except a. when decision makers are forced to compare their projections to actual outcomes, there is a tendency to improve. b. conscious or unconscious biases are removed. c. negative NPV projects are identified before they begin. d. forecasts are improved. e. all of the above are benefits of the post-audit.

Q: As we approach total pollution abatementA) the marginal cost to society falls. B) the marginal cost to society rises.C) the marginal cost to society equals the marginal benefit to society. D) the marginal cost to society falls but then rises.

Q: Which statement is true regarding an export management company (EMC)? A) It acts as a middleman for firms with relatively large international sales volume. B) It operates under its own name while providing services to another firm. C) It does not have direct responsibility to the parent firm. D) It acts as a middleman for firms willing to involve their own personnel in international functions. E) It calls for smaller investment from the parent firm to get into international markets.

Q: All of the following factors can complicate the post-audit process except a. each element of the cash flow forecast is subject to uncertainty. b. projects sometimes fail to meet expectations for reasons beyond the control of operating executives. c. it is often difficult to separate the operating results of one investment from those of a larger system. d. executives who were responsible for a given decision might have moved on by the time the time the results of the long term project are known. e. the most successful firms, on average, are the ones that put the least emphasis on the post-audit.

Q: When poverty is defined by an relative real income level, what will happen to the poverty rate if the distribution of income is not perfectly equal?A) The poverty rate will increase forever.B) The poverty rate will eventually be zero.C) The poverty rate will always remain constant. D) The poverty rate will change, but always exist.

Q: A marketing manager of a firm with small international sales volume is looking for a middleman who can take responsibility for promotion of the company's products, credit arrangements, physical handling, and market research. Also, the middleman must be able to provide information on financial, patent, and licensing matters. What type of middleman would be the best choice for this marketing manager if he wants to meet his objectives? A) a manufacturer's export agent B) an export merchant C) a trade representative D) an export management company E) a complementary marketer

Q: The ____ involves comparing the actual results with those predicted by the project's sponsors and explaining why any differences occur. a. discounted payback b. internal rate of return c. post-audit d. net present value e. economic value added

Q: What company offers a manufacturer's retail store? A) Toys "R" Us B) Walmart C) Costco D) Benetton E) IKEA

Q: Refer to the above table. If the marginal revenue product is $21, how many workers will the profit maximizing monopsonist hire and what wage will they pay each worker?A) 1; $17 B) 2; $19 C) 2; $21 D) 3; $21

Q: Net present value is preferred to internal rate of return for capital budgeting decisions because a. the internal rate of return does not allow you to determine if the project is acceptable. b. the net present value is the only method that allows you to determine which independent project is acceptable. c. the net present value allows you to compare mutually exclusive projects. d. the internal rate of return for a project is different for each firm. e. NPV contains information about a projects "safety margin" which is not inherent in IRR.

Q: Home-country middlemen are also known as ________ middlemen, and are located in the producing firm's country. A) area B) local C) merchant D) domestic E) regional

Q: Labor unions that consist of workers from a particular industry, such as automobile manufacturing, are calledA) craft unions. B) industrial unions. C) collective unions. D) closed unions.

Q: What were the ratios of workers paying into Social Security to retirees receiving benefits for 1950 and 2009, respectively? a. 1950: 16.5 to 1 2009: 3 to 1 b. 1950: 10.5 to 1 2009: 6 to 1 c. 1950: 8.5 to 1 2009: 8 to 1 d. 1950: 6.5 to 1 2009: 10 to 1 e. 1950: 3.5 to 1 2009: 16 to 1

Q: How are global retailers like IKEA, Costco, and Walmart becoming major domestic middlemen for international markets? A) They maintain their core marketing approaches while localizing the array of products, promotions, and other peripheral aspects of their operations. B) They work under the names of the manufacturers and function as low-cost, independent marketing departments with direct responsibility to the parent firms. C) They have minimum investment costs as they do not commit to investing in company personnel. D) They serve as the producer's export department but have a short-term relationship, cover only one or two markets, and operate on a straight commission basis. E) They offer reduction of export costs, demand expansion through promotion, trade barrier reduction, and improvement of trade terms through bilateral bargaining.

Q: Marginal factor cost is computed asA) total cost of the resource/total amount of the resource being used.B) change in the total cost of the resource/total amount of the resource being used. C) total cost of the resource/change in the amount of the resource being used.D) change in the total cost of the resource/change in the amount of the resource being used.

Q: Which of the following statements concerning the internal rate of return is false? a. The internal rate of return for a capital budgeting project is the same for all firms regardless of their cost of capital. b. A project is acceptable long as the project's internal rate of return is greater than the hurdle rate for the project. c. The internal rate of return is dependent on the timing of the cash flows. d. A project with a positive internal rate of return will always increase the value of the firm if the project is accepted. e. You do not need to know the required rate of return to solve for the internal rate of return.

Q: A disadvantage when using home-country middlemen as intermediaries in the distribution process is the A) large financial investment required. B) limited control over the distribution process. C) large managerial investments required. D) limited number of retailers in the foreign country who can be reached. E) large amount of commission.

Q: Suppose a dangerous workplace is made safer through the installation of guards and other equipment that reduce the physical hazards of the work environment. If we observe no reduction in injuries, we might conclude thatA) the safety equipment isnʹt adequate and better equipment should be installed.B) the firm has responded by lowering wages and hiring less capable people who are more likely to be injured.C) the injury rate before installation of the safety equipment had been underreported.D) workers responded to the safer environment by not exercising as much care themselves, generating more injuries than if they had not changed their behavior.

Q: Discounted payback's primary advantage over traditional payback is that a. discounted payback considers cash flows that occur after the discounted payback period. b. discounted payback is always shorter than traditional payback making more projects acceptable. c. discounted payback does consider the time value of money. d. discounted payback will let you accept projects whose discounted payback period is longer than the useful of the project. e. all of the above are true.

Q: The channel process includes all activities, beginning with the manufacturer and ending with the A) wholesaler. B) agent middlemen. C) merchant middlemen. D) retailer. E) final consumer.

Q: When a falloff in usage of a product by some consumers causes others to stop purchasing the item there isA) price leadership. B) negative-sum game.C) positive market feedback. D) negative market feedback.

Q: Which group takes title to manufacturers' goods and assume the trading risks? A) merchant middlemen B) brokers C) buying offices D) export agent E) agent middlemen

Q: Which of the following is not a rationale for using the NPV method in capital budgeting? a. An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital. b. A project whose NPV is positive will increase the value of the firm if that project is accepted. c. A project is considered acceptable if it has a positive NPV. d. A project is not considered acceptable if it has a negative NPV. e. All of the above are true.

Q: Because the short-run average total cost curve slopes downward for an information product, the firm experiencesA) a downward sloping marginal cost curve.B) a downward sloping average variable cost curve.C) short-run economies of operation. D) long-run diseconomies of scale.

Q: Which group is frequently criticized for not representing the best interests of a manufacturer? A) global wholesalers B) trading companies C) consumers D) merchant middlemen E) brokers

Q: If the NPV for a project is positive it must be that a. the discounted payback period is longer than the useful life of the project. b. the internal rate of return is lower than the discount used. c. the project is not acceptable on a risk adjusted basis. d. this project is preferred to any other mutually exclusive project. e. accepting the project increases the value of the firm.

Q: The demand curve for a monopolistically competitive firm is A) elastic because the products produced are homogeneous. B) inelastic because of barriers to entry.C) inelastic because of the profit maximizing behavior of the firm.D) elastic because of product differentiation.

Q: What has proven to be an important way to break the trade barrier imposed by the Japanese distribution system? A) direct sales through catalogs B) large wholesale stores C) street corner kiosks D) Internet shopping E) television advertising

Q: The advantage of the payback period over other capital budgeting techniques is that a. it is the simplest and oldest formal model to evaluate capital budgeting model. b. it directly accounts for the time value of money. c. it ignores cash flows beyond the payback period. d. it always leads to decisions that maximize the value of the firm. e. it incorporates risk into the discount rate used to solve the payback period.

Q: A monopoly will maximize profits at the level of output at whichA) MR = MC. B) MR = AFC. C) MC = ATC. D) MC = P.

Q: What is often the approach of choice in markets with insufficient or underdeveloped distribution systems? A) direct marketing B) a big wholesale store C) Internet selling D) a discount house E) television advertising

Q: The importance of capital budgeting decisions is due to all of the following factors except for: a. the impact of a capital budgeting decision is long term; the firm loses some decision-making flexibility when capital projects are purchased. b. effective capital budgeting can improve the timing of asset acquisition and the quality of assets purchased. c. the acquisition of fixed assets typically involves substantial expenditures, and before a firm spends a large amount of money, it must have the funds available. d. capital budgeting techniques overcome the problems with error in forecasts for asset requirements and projected sales, we will still be able to determine if we should fund the project. e. all of the above are factors that make capital budgeting important.

Q: When economic profits in a perfectly competitive industry are positive, A) new firms will be attracted to the industry, and economic profits will decline to zero. B) the industry is in equilibrium. C) firms will increase output to earn even higher profits. D) firms will increase prices while they have the opportunity.

Q: The rate of change in retailing around the world appears to be directly related to the A) literacy rate. B) rate of inflation. C) population growth. D) speed of economic development. E) currency exchange rate.

Q: A college intern working at Anderson Paints evaluated potential investments⎯that is, capital budgeting projects⎯using the firm's average required rate of return (WACC), and he produced the following report for the capital budgeting manager: Project NPV IRR Risk LOM $1,500 12.5% High QUE 0 11.0 Low YUP 800 9.5 Average DOG (450) 10.0 Low The capital budgeting manager usually considers the risks associated with capital budgeting projects before making her final decision. If a project has a risk that is different from average, she adjusts the average required rate of return by adding or subtracting 2 percentage points. If the four projected listed above are independent, which one(s) should the capital budgeting manager recommend be purchased? a. Project LOM only, because it has both the highest NPV and the higher IRR. b. Projects LOM, QUE, and YUP, because they all have positive NPVs and their IRRs. c. Projects DOG and QUE, because their IRRs are greater than their risk-adjusted discount he projects returns are higher than the rates of return that capital budgeting manager uses to evaluate them. d. Projects QUE, YUP, and DOG, because their IRRs are greater than their risk-adjusted discount rates-that is, the projects returns are higher than the rates of return that capital budgeting manager uses to evaluate them. e. There is not enough information to answer this question, because the firm's average required rate of return cannot be determined.

Q: When a firm is operating at an output rate at which total revenue equal total costs, this is calledA) its shutdown point. B) its breakeven point.C) a short-run profit. D) a loss.

Q: General Motors, ________, and DaimlerChrysler have created a single online site called Covisint for purchasing automotive parts from suppliers. A) Toyota Motor Corporation B) Honda Motor Company C) Ford Motor Company D) Nissan Motor Company E) Hyundai Motors

Q: Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics: Year Cash Flows 0 $(170,000) 1 60,750 2 60,750 3 60,750 4 60,750 Union Atlantic's capital budgeting manager has determined that the project's net present value is $7,008. According to this information, which of the following statements is correct? a. The project's internal rate of return (IRR) must be greater than 14 percent. b. The project's discounted payback must be less that its economic life. c. The project should be purchased by Union Atlantic. d. All of these statements are correct. e. None of these statements is correct.

Q: If, in the short run, the level of output is zero, which of the following statement is true?A) total variable cost is zero but total cost equals total fixed cost, and both of the latter exceed zeroB) total cost and total fixed cost graphs will begin at the originC) total fixed cost will also be zero at first but will rise once output risesD) none of the above

Q: What makes Walmart's transactions with suppliers highly efficient and lowers its cost of operations? A) clean business reputation B) internal Internet-based system with suppliers C) lack of competitors D) outreach programs to placate small retailers E) ability to influence foreign governments

Q: Tara is evaluating two mutually exclusive capital budgeting projects that have the following characteristics: Cash Flows Year Project Q Project R 0 $(4,000) $(4,000) 1 0 3,500 2 5,000 1,100 IRR 11.8% 12.0% If the firm's required rate of return (r) is 10 percent, which project should be purchased? a. Both projects should be purchased, because the IRRs for both projects exceed the firm's required rate of return. b. Neither project should be accepted, because the IRRs for both projects exceed the firm's required rate of return. c. Project Q should be accepted, because its net present value (NPV) is higher than Project R's NPV. d. Project R should be accepted, because its net present value (NPV) is higher than Project Q's NPV. e. None of the above is a correct answer.

Q: When a person buys stock in a company, that person is buying , but when a person buys a bond in a company, that person is the company.A) ownership; borrowing funds from B) ownership; lending funds toC) debt; lending funds to D) debt; borrowing funds from

Q: In Japan, under the Large-Scale Retail Store Law, all proposals for new "large" stores were first judged by the A) Transport and Tourism Department. B) Internal Affairs and Business Council. C) Ministry of International Trade and Industry. D) Health and Welfare Committee. E) Local Retailers Union.

Q: When Richard evaluated a capital budgeting project⎯a new machine needed to manufacture inventory⎯using his firm's required rate of return, he discovered that the project's net present value (NPV) is negative. Based on this information, which of the following must be correct? a. The project's internal rate of return is also negative. b. The project's discounted payback period is greater than its economic life. c. As long as the new machine's initial investment outlay is fairly low, the firm should purchase if it is used to replace an older machine that is required to produce inventory. d. The project's traditional payback period must be greater than the maximum payback period that the firm has established. e. Two or more of these scenarios must be correct.

Q: If your business earns $10,000 in revenues, has explicit costs of $7,000, and implicit costs of $5,000, your economic profit isA) $2,000. B) -$2,000.C) $5,000. D) $3,000.

Q: Which feature characterizes the business philosophy of Japanese distribution channels? A) loyalty B) direct sales C) fast delivery D) variety E) price competition

Q: Two firms evaluated the same capital budgeting project to determine whether to purchase it. The CFO of Anchor Weights Corporation (AWC) reported that she determined that the project's internal rate of return equals 9 percent, and she recommended that the project be purchased. The CFO of Sectional Spas Incorporated (SSI) simply reported that the project was unacceptable to his firm when he evaluated it using one of the capital budgeting techniques that consider the time value of money. Given this information, which of the following statements is correct? a. The net present value of the project must be positive for both firms. b. If the SSI's CFO computes the IRR for the project, he will find that it is less than 9 percent for his company. c. AWC's CFO must have used the traditional payback period method to evaluate the project. d. If the project is acceptable (unacceptable) to one firm, it must be acceptable (unacceptable) to both firms. As a result, one of the CFOs made a mistake when evaluating the project. e. SSI's must have a required rate of return that is greater than 9 percent.

Q: An indifference curve showsA) the combinations of goods that a consumer does not like very much.B) the combinations of goods that generate the same ratio of marginal utilities.C) the set of consumption alternatives that yield the same amount of total utility.D) the set of consumption alternatives that yield the same amount of marginal utility.

Q: What group is considered to be the foundation of the Japanese distribution system? A) consumers B) brokers C) manufacturers D) small retailers E) wholesalers

Q: The objective of financing the income statement under the projected balance sheet method is to determine how much income the company will earn and then retain for reinvestment in the business during the period that is forecasted. a. True b. False

Q: Suppose that Jacob is going to a buffet restaurant that allows him to eat as many chicken wings as he wants at a fixed price. How would you predict the number of chicken wings that Jack will eat using utility theory?

Q: Distribution in ________ has long been considered the most effective nontariff barrier to that market. A) China B) Japan C) the U.S. D) Western Europe E) Canada

Q: A good control system helps to ensure that plans are executed properly and to facilitate a timely modification of plans if the assumptions upon which the initial plans are based turn out to be inaccurate. a. True b. False

Q: Suppose that the value of the long -run absolute elasticity of demand for a good is 1.21. Then, we know the short -run absolute price elasticity of demand will beA) inelastic. B) greater than 1.21. C) elastic. D) less than 1.21.

Q: In an import-oriented distribution structure, A) the importerwholesaler traditionally performs most of the marketing functions. B) the relationship between the importer and any middleman is similar to that found in a mass-marketing system. C) several independent agencies provide functions such as advertising, marketing research, and financing. D) the idea of a channel as a chain of intermediaries performing specific activities is common. E) the distribution system is national in scope.

Q: With lumpy assets, a small projected increase in sales could potentially mandate a significant increase in plant and equipment, which would lead to a very large financial requirement. a. True b. False

Q: As we approach total pollution abatementA) the marginal benefit to society declines. B) the marginal benefit to society increases.C) the marginal benefit to society increases, but at a decreasing rate. D) the marginal cost to society declines.

Q: Which distribution structure is also known as a traditional distribution structure? A) Export-oriented B) Import-oriented C) Manufacturer-oriented D) Service-oriented E) Customer-oriented

Q: Lumpy assets primarily affect the turnover of fixed assets and, consequently, the financial requirements associated with the expansion of operations. a. True b. False

Q: When poverty is defined by an absolute real income level, what will happen to the poverty rate if income per capita in a country continues to grow? A) The poverty rate will increase forever. B) The poverty rate will eventually be zero. C) The poverty rate will increase and then decrease. D) The poverty rate will never change.

Q: In a ________ distribution structure, an importer controls a fixed supply of goods and the marketing system develops around the philosophy of selling a limited supply of goods at high prices to a small number of affluent customers. A) domestic B) traditional C) manufacturer-oriented D) service E) customer-oriented

Q: Potential changes in sales prices, fixed operating costs and/or variable costs should be taken into account when using breakeven analysis. a. True b. False

Q: Refer to the above table. What is the marginal factor cost when the firm employs the third unit of labor?A) $62 B) $57 C) $25 D) $21

Q: The ________ process includes the physical handling and distribution of goods, the passage of ownership (title), and the buying and selling negotiations between producers and middlemen and between middlemen and customers. A) logistics B) marketing C) channel D) distribution E) control

Q: All else equal, excess capacity means that more external financing is required to support increases in sales than would be needed if the firm previously operated full capacity. a. True b. False

Q: Labor unions composed of workers who engage in a particular trade or skill, such as carpentry, are calledA) craft unions. B) industrial unions. C) collective unions. D) closed unions.

Q: A physical distribution system involves only the physical movement of goods.

Q: A change of transportation mode can affect a change in packaging and handling, inventory costs, warehousing time and cost, and delivery charges.

Q: The financial control phase of financial forecasting is concerned with implementing the financial plans, and with managing the feedback and adjustment process needed to ensure that the goals of the firm are pursued appropriately. a. True b. False

Q: The additional revenue associated with hiring one additional unit of some factor input, such as labor, is calledA) marginal cost. B) marginal revenue product. C) marginal factor cost. D) marginal physical product.