C) sales strategy
D) None of the above—all are part of a firm's strategy.
Answer: D
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
11) What is the purpose of having a strategy?
Answer: A strategy defines for a manager the actions to be taken to maximize the firm's profits.
Skill: Conceptual
AACSB: Written and Oral Communication
Status: Old
12) Explain what the statement "We can't have everything we want" means.
Answer: Because resources are scarce, we face tradeoffs. For example, a baker cannot use a piece of dough she has for both pizza and a croissant, so she has to decide which to make.
Skill: Conceptual
AACSB: Reflective Thinking
Status: Old
13) What is profit?
Answer: Profit is the difference between a firm's revenue or income and its costs or expenses.
Skill: Definition
AACSB: Written and Oral Communication
Status: Old
14) Give an example of a tradeoff a pizza restaurant might face.
Answer: Whether to make pepperoni or combination pizzas.
Skill: Definition
AACSB: Analytical Thinking
Status: Old
15) Why might raising the price of a good by a dollar lead to lower profits?
Answer: If the extra profit margin made on the units sold does not cover the lost profit from selling fewer units, then profits will actually decrease if the price is raised.
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
16) Why might raising the price of a good by a dollar lead to higher profits?
Answer: If the extra profit margin made on the units sold covers the profit lost from selling fewer units, then profits will increase if the price is raised.
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
17) Raising the price of a good by one dollar
A) increases profits.
B) decreases profits.
C) leaves profits unchanged.
D) leads to an indeterminant change in profits.
Answer: D
Skill: Analytical
AACSB: Analytical Thinking
Status: Old
18) Most private firms seek to
A) maximize revenue.
B) maximize profit.
C) minimize headcount.
D) maximize employee salaries.
Answer: B
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
For the following, please answer "True" or "False" and explain why.
19) Managers have to understand the decision making of others.
Answer: True. Other entities such as governments and rivals may undertake actions that constrain a firm. Consumers and workers make decisions on how to spend their scarce resources, such as budgets and time. To maximize profits, the manager must understand how these other entities will behave.
Skill: Conceptual
AACSB: Analytical Thinking
Status: Old
1.2 Economic Models
1) The purpose of making assumptions in economic model building is to
A) force the model to yield the correct answer.
B) minimize the amount of work an economist must do.
C) simplify the model while keeping important details.
D) express the relationship mathematically.