Q&A Hero

Q: Other things held constant, the greater the firm's use of debt, the greater the change in EPS that will result from a change in sales volume. a. True b. False

Q: The feedback effect can be thought of as a type of A) social regulation. B) economic regulation. C) creative response, which reduces the lawʹs effectiveness. D) regulatory lag.

Q: An e-vendor in a foreign market can generally ignore culture as an important variable because the commerce is being done via the Internet, which is culturally insensitive.

Q: If a small change in sales results in a large change in EPS, then it must be caused by the financial leverage associated with the firm. a. True b. False

Q: Ideally, a website should be translated into the languages of the target market.

Q: When a new product is introduced in the market, Lenny always wants to see how popular the item becomes before he purchases it. Lennyʹs behavior is known asA) overt collusion. B) limit-pricing.C) a network effect. D) price leadership.

Q: The degree of financial leverage (DFL) is an index number that measures the effect of a change in sales on the financial breakeven point. a. True b. False

Q: Refer to the above figure. The above figure shows the cost structure of a firm producing an information product. Which curve would represent the average variable cost?A) Curve 1 B) Curve 2C) Curve 3 D) none of the above

Q: Legal advice is not necessary when entering distribution contracts with middlemen.

Q: An advantage of breakeven analysis is that it can be applied with equal precision whether a firm's cost curve is linear or nonlinear. a. True b. False

Q: The demand curve for a monopolistically competitive firm is A) more elastic than for a perfectly competitive firm. B) more elastic than for a monopoly firm. C) more inelastic than for a monopoly firm. D) the same elasticity as a perfectly competitive firm.

Q: Selecting a middleman is usually as simple as asking for a recommendation from a company's local manager.

Q: It is more difficult to estimate fixed and variable cost per unit for a project during planning than once the project is underway. This is because, once a project is operational, the firm has access to clearly reported and separated actual costs that the project incurs. a. True b. False

Q: For a monopolist that is maximizing profits,A) price exceeds marginal cost. B) price equals marginal revenue.C) price equals average total cost. D) marginal revenue exceeds price.

Q: In the United States, if a middleman is terminated, the company is required to pay 1 percent of the middleman's average annual compensation multiplied by the number of years the middleman served as a final settlement.

Q: A high degree of operating leverage, other things held constant, means that a relatively small change in unit sales will result in a large change in operating income. a. True b. False

Q: A constant-cost industry A) is one in which an increase in demand is matched by a proportional increases in long -run supply. B) generates increasing profits whenever demand increases because the new long -run equilibrium price is above the old price even though average costs have not changed. C) has a horizontal long-run supply curve. D) has a downward sloping long-run supply curve.

Q: Channels of distribution often pose longevity problems as they tend to be small institutions.

Q: The higher the DOL, the greater the firm's use of debt and the more earnings will change following a change in sales. a. True b. False

Q: A firm in a perfectly competitive market maximizes profits when it findsA) the price at which total revenue minus total cost is the greatest.B) the quantity at which total revenue minus total cost is the greatest. C) the quantity at which total revenue equals total cost.D) the quantity at which total revenue is maximized.

Q: Using foreign-country middlemen moves the manufacturer away from the market and the company becomes less involved with problems of language, physical distribution, communications, and financing.

Q: When a firm increases its degree of operating leverage by substituting fixed costs for variable costs, it normally does so to decrease its breakeven point and to increase its profit. a. True b. False

Q: Trading companies provide the best means for intensive coverage of the market in Japan.

Q: In a map showing short-run cost functions, one curve begins at the origin and rises as output expands. It is called theA) the marginal cost curve. B) the total fixed cost curve.C) the total cost curve. D) the total variable cost curve.

Q: Suppose a firm uses a high degree of operating leverage and operates in an industry whose sales are greatly affected by changes in the overall level of economic activity. The riskiness of that firm's earnings stream will likely be greater than the earnings of a firm in the same industry which has a lower degree of operating leverage. a. True b. False

Q: The Export Trading Company Act allows producers of similar products to form export trading companies.

Q: Bonds are A) promises to repay loans. B) promissory notes issued by partnerships. C) promissory notes issued by proprietorships. D) shares of ownership in a corporation.

Q: The WTO in 2003 ruled export management companies to be in violation of international trade rules.

Q: If firm A uses more operating leverage than firm B, firm A will probably have a greater percentage profit margin per unit than firm B, if both firms are otherwise identical and operating above their respective operating breakeven levels. a. True b. False

Q: Suppose your donut shop earns $24,000 in total revenues per month with explicit costs of $12,000 and opportunity costs of $8,000. Your accounting profit isA) $16,000. B) $12,000. C) $4,000. D) zero.

Q: The use of a high level of operating leverage can enable a firm to maintain a steady operating income despite large changes in the level of sales. a. True b. False

Q: An export management company (EMC) functions as a low-cost, independent marketing department with direct responsibility to the parent firm.

Q: An indifference curve provides the set of consumption alternatives thatA) yield the same total amount of satisfaction. B) maximize the utility of the consumer.C) can be purchased for the same amount of money.D) yield the same marginal utility for the last unit consumed of each good.

Q: Domestic middlemen offer many advantages for companies with large international sales volume.

Q: Other things held constant, a high degree of operating leverage will mean that a relatively small change in sales will result in a large change in operating income. a. True b. False

Q: What do we know about total utility when marginal utility is zero?

Q: The distribution channel process includes all activities, beginning with the manufacturer and ending with the retailer.

Q: One potential benefit of high operating leverage is that it can reduce the average cost per unit at high levels of output, thus generating a competitive cost advantage. a. True b. False

Q: Suppose that the value of the short -run absolute elasticity of demand for a good is 0.38. Then, we know the long-run absolute price elasticity of demand will beA) 0. B) greater than 0.38. C) elastic. D) less than 0.38.

Q: Merchant middlemen tend to be more controllable than agent middlemen because they take title to manufacturers' goods.

Q: Firms A and B produce exactly the same products, but use different production technology. Firm A's variable costs are greater than those of Firm B, but its operating breakeven point is lower. From this information, other things held constant, we can conclude that Firm B has greater operating leverage than Firm A. a. True b. False

Q: Assuming that pollution cannot be removed from the environment at zero cost, the optimal level of pollutionA) will be zero. B) will be negative.C) will be positive. D) cannot be determined.

Q: Agent middlemen work on commission and do not take title to the merchandise.

Q: The operating breakeven volume in units can be found by dividing the firm's total fixed cost in dollars by its profit margin per unit (i.e., price less variable cost). a. True b. False

Q: Which of the following CANNOT be eliminated in a growing economy such as the U.S. economy? A) absolute poverty B) relative poverty C) both absolute and relative poverty D) Neither absolute nor relative poverty can be eliminated.

Q: Direct marketing works well in affluent markets as well as in markets with underdeveloped distribution systems.

Q: Breakeven analysis can involve determining the magnitude of the firm's profit or losses at output levels on and around the point where revenues equal costs. a. True b. False

Q: Refer to the above table. What is the marginal factor cost when the firm employs the second unit of labor?A) $19 B) $21 C) $36 D) $38

Q: Globally, wholesaling shows a greater diversity in its distribution structure than does retailing.

Q: Financial control involves a feedback and adjustment process that (1) ensures that existing plans are followed, or (2) modifies existing plans in response to changes in the firm's operating environment. a. True b. False

Q: The earliest unions in the United States wereA) industrial unions. B) craft unions.C) public-sector unions. D) military unions.

Q: In the context of distribution structures, one of Walmart's strengths is its ability to work with distributors one-on-one.

Q: If any firm with a positive net worth is operating its fixed assets at full capacity, if its dividend payout ratio is 100 percent, and if it wants to hold all financial ratios constant, then for any positive growth rate in sales, the firm will require external financing. a. True b. False

Q: If the price of a product being sold in a perfectly competitive market increases,A) the MRP curve shifts to the right. B) the MPP curve shifts to the right.C) the MFC curve shifts to the right. D) the MFC curve shifts to the left.

Q: As traditional channel structures are changing, importers and retailers are becoming less involved in new product development.

Q: The projected balance sheet forecasting method would be appropriate if, in a regression of sales on each asset and spontaneous liability, the regression line was linear and passed through the origin. a. True b. False

Q: According to your text, the annual cost of regulation (federal, state and local) in the United States is estimated to exceed per year.A) $500 million B) $900 million C) $50 billion D) $1 trillion

Q: In the context of the distribution structure in Japan, it has been observed that Japanese consumers favor cheaper prices over personal service.

Q: The projected balance sheet method assumes that the key ratios are constant, which means, for example, that if you plotted a graph of inventories versus sales, the regression line would be linear and would have a positive Y-intercept. a. True b. False

Q: When network effects are important, then an industry can experienceA) positive market feedback. B) prince-leadership. C) a zero-sum game. D) a vertical merger.

Q: The Japanese distribution structure is similar to ones found in the United States or Europe.

Q: The fact that long-term debt and equity funds are raised infrequently and in large amounts lessens the need for the firm to forecast them on a continual basis. a. True b. False

Q: Refer to the above figure. The figure shows the cost structure of a firm producing an information product. Which curve would represent the marginal cost for an information product?A) Curve 1 B) Curve 2C) Curve 3 D) none of the above

Q: A distinguishing characteristic of the Japanese distribution channel system is that it is controlled by a few small local retailers.

Q: A firm's peak borrowing needs will probably be overstated if it bases its monthly cash budget on uniform cash receipts and disbursements, but actual receipts are concentrated at the beginning of each month. a. True b. False

Q: Because of product differentiation in a monopolistically competitive market, the demand curve for an individual firm will beA) horizontal. B) vertical.C) downward sloping. D) upward sloping.

Q: In the traditional distribution structure in a developing country, independent agencies that provide facilitating functions are nonexistent or underdeveloped.

Q: Other things held constant, the higher the degree of total leverage exhibited by a firm, the greater the risk associated with that firm. a. True b. False

Q: ʺA monopolist can charge whatever price it wants.ʺ Do you agree or disagree? Why?

Q: In a traditional distribution structure, distribution systems are national rather than local in scope.

Q: Other things held constant, a high degree of total leverage will mean that a relatively small change in sales will result in a large change in EPS. a. True b. False

Q: In a decreasing-cost industry, an increase in industry output willA) lead to a higher market price.B) lead to a lower market price.C) shift each firmʹs average fixed cost curve up. D) shift each firmʹs short run supply curve up.

Q: Traditional distribution channels in developing countries evolved from economies with a strong dependence on imported manufactured goods.

Q: Two firms that have the same financial leverage must also have the same ROE, because both financial leverage and ROE measure the risk associated with equity financing. a. True b. False

Q: In the above figure, at which output level is this firm earning negative economic profits?A) 2 B) 5 C) 10 D) 12

Q: In an import-oriented distribution structure, supply often exceeds demand.

Q: Other things held constant, if a firm operates at a profit and sales increase, the degree of financial leverage will decline. a. True b. False

Q: The behavior of channel members in the distribution process is the result of the interactions between the cultural environment and the marketing process.

Q: In a graph showing the short -run cost curves, the one curve which declines continuously as we expand output is calledA) the average fixed cost curve. B) the average variable cost curve. C) the average total cost curve. D) the marginal cost curve.

Q: Everything else equal, the higher the DFL is for a firm, the closer its operations are to its operating breakeven point. a. True b. False