Deck 10: Information and Value Creation

Question 1

Which of the following is another term for "teaching to the test?"

A) Sample bias
B) Test variance
C) Teaching discrimination
D) Multitasking
E) None of the above

Answer 1

D

Question 2

When is a signal informative?

A) When it is lightly advertised by the firm
B) When it is more profitable for the high quality firm to offer it
C) When there are many firms advertising substitute products
D) When it is offered by the low quality firm
E) When the first firm that signals is the low quality firm

Answer 2

B

Question 3

Which of the following serves as a voluntary signal of quality?

A) Warrantee
B) Independent reviews
C) Truth in Advertising
D) Free product financing
E) Public claims

Answer 3

A

Question 4

Which of the following best describes the consumer's shopping problem?

A) Having enough money to purchase all necessary goods and services
B) Finding the seller that offers the highest value of B - P
C) Determining the quality of products
D) Locating sellers that provide the required products
E) Selecting between brand products and non-brand products.

Question 5

Why is advertising an effective signal of quality in an experience good?

A) Consumers are uninformed and need advertising to provide information
B) Advertising lists the qualities of a product
C) Consumers believe firms that can afford to heavily advertise sell quality products
D) Sellers can ignore low quality issues in their advertisements
E) Consumers believe advertising more than word of mouth information

Question 6

When consumers learn about many products at once,it is known as a :

A) Simultaneous search
B) Parallel search
C) Serial search
D) Sequential search
E) Divided search

Question 7

Why would a report card that measures inputs possibly lead to multitasking?

A) Sellers would raise the price of goods with low quality inputs
B) Consumers would only know the "ingredients" in a production process
C) The cost of the report card would be passed on in lower product quality
D) Sellers may invest only in reported inputs but scale back on unreported inputs
E) Firms will not disclose poor report card scores

Question 8

Unraveling is an economic theory that describes which of the following?

A) Low quality products will be quickly discovered and abandoned by buyers
B) High seller concentration leads to the development of many substitute products
C) Few sellers improve product quality once they have scale in production
D) Even low quality sellers will disclose their product quality
E) Consumers ultimately switch products regardless of quality

Question 9

Which of the following is measured by a report that assesses how a product is produced?

A) Process
B) Inputs
C) Warrantees
D) Outcomes
E) Longevity

Question 10

Products for which consumers cannot easily evaluate quality even after purchasing and using the product are called:

A) Experience goods
B) Search goods
C) Retail goods
D) Consumer goods
E) Credence Goods

Question 11

Which of the following is measured by a report card that assesses product performance?

A) Process
B) Inputs
C) Warrantees
D) Outcomes
E) Longevity

Question 12

When consumers learn about one seller at a time it is known as a :

A) Simultaneous search
B) Parallel search
C) Serial search
D) Sequential search
E) Divided search

Question 13

Products for which consumers cannot easily compare product characteristics and value information from others are called:

A) Experience goods
B) Search goods
C) Retail goods
D) Consumer goods
E) Credence Goods

Question 14

What term best describes a firm informing customers about a product's benefits?

A) Advertising
B) Certification
C) Disclosure
D) Notice
E) Broadcasting

Question 15

Products for which consumers can easily obtain the information required to compare alternatives are called:

A) Experience goods
B) Search goods
C) Retail goods
D) Consumer goods
E) Credence Goods

Question 16

Which of the following is measured by a report card that assesses the components of a product?

A) Process
B) Inputs
C) Warrantees
D) Outcomes
E) Longevity

Question 17

Which of the following is a grade used to evaluate quality?

A) Report card
B) Status report
C) Verification
D) Warrantee claim
E) Product statement

Question 18

Why do consumers tend to gravitate towards non-profit firms when evaluating credence goods?

A) Consumers like giving to charities
B) Non-profit firms charge lower prices
C) Consumers can deduct some or all of the purchase price for tax purposes
D) Non-profit firms offer goods and services not offered by for profit firms
E) Consumers believe non-profit sllers will be less likely to skimp on quality for profit.

Question 19

Which of the following is not a way in which consumers can benefit from report cards?

A) Easy identification of high quality sellers
B) Increases in demand elasticity incent sellers to improve quality
C) Good report cards lead to more advertising
D) Report cards improve sorting by consumers
E) Consumers can more easily identify quality sellers

Question 20

Which of the following terms describes when efforts to promote improvements on one dimension of performance are confounded by changes in other dimensions of performance?

A) Multitasking
B) Co-linearity
C) Test bias
D) Dimension bias
E) Linking

Question 21

Which of the following is a source for horizontal differentiation?

A) Price
B) Quality
C) Advertising
D) Location
E) Availability of substitutes

Question 22

Which of the following terms describes when firms with high scores tend to have more than their share of luck in rankings?

A) Measurement bias
B) Process error
C) Mean regression
D) Multitasking
E) Mean reversion

Question 23

Why do consumers often rely on friend's advice when shopping for experience goods?

A) They know their friend's tastes
B) Friends are less likely to be biased reporters
C) There are no search costs in seeking friend's advice
D) Friends are always more accurate than unknown verifiers
E) All friends share the common goal of highest quality

Question 24

Conflicts of interest in the certifier market often can lead to which of the following?

A) Higher priced goods and services
B) Lower competition between substitute goods
C) A reduction in the number of competitive sellers
D) Certification bias
E) Less product choice for the consumer

Question 25

Which of the following is a statistical process in which raw outcome measures are adjusted for factors that are beyond the control of the seller?

A) Risk adjustment
B) Mean reversion
C) Score adjustment
D) Noise limiting
E) Outcome adjustment

Question 26

Which of the following would not reduce gaming of report cards?

A) Reporting scores using simple graphics
B) Using simple composite scores
C) Making firms pay for report card results
D) Measure quality at the most aggregate level
E) risk adjust report card scores

Question 27

Which of the following is not a reason for customer survey bias in quality measures?

A) Different customers may use different measurement criteria
B) Customers may have an incentive to inflate ratings to influence the average score
C) Customers often lie in consumer surveys
D) Customers are reluctant to leave negative feedback
E) Consumer feedback is unverifiable.

Question 28

High quality certification in horizontally differentiated goods is aided by which of the following?

A) Outcome based scorecards
B) Internet firms like Google and Yahoo
C) Risk adjustment
D) Mean reversion
E) Firms paying for more scorecards

Question 29

Which of the following would make an outcome report card difficult to produce?

A) Large sample of outcome measures
B) Small sample of outcome measures
C) Many outcomes from one product
D) Many sellers produce similar products
E) Consumers purchase high quantities of the product

Question 30

Motivation bias and survivor bias are most common in which of the following?

A) Input based scorecards
B) Process based scorecards
C) Scorecards on horizontally differentiated products
D) Scorecards on vertically differentiated products
E) Low cost products