Question 1

Sometimes firms are compelled to grow to accommodate the growth of a key customer.

Accepted Answer

If a firm's key customer experiences growth and requires more products or services from the firm, the firm may need to grow in order to meet the demands of that customer. This can include expanding production capacity, increasing staff, or opening new locations. Failing to accommodate the growth of a key customer can result in loss of business and jeopardize the firm's long-term success.

Question 2

________ are(is) generated when increasing production lowers the average cost of each unit produced.

Accepted Answer

Economies of scale are generated when increasing production lowers the average cost of each unit produced. This is due to the fact that as production increases, fixed costs such as rent, machines, and equipment are spread over more units, reducing the average cost per unit.

Question 3

Market leadership occurs when a firm holds the number one or number two position in an industry or niche market in terms of sales volume.

Accepted Answer

Market leadership is commonly defined as holding the top one or two positions in a particular market based on factors such as sales volume, market share, and brand recognition. Therefore, the statement is true.

Question 4

Which of the following is NOT one of the five stages in the organizational life cycle?

Accepted Answer

The five stages of organizational life cycle are Introduction, Early growth, Maturity, Scale, and Decline. There is no stage called "Scale" in the organizational life cycle.

Question 5

The majority of businesses go through a discernable set of stages of growth referred to as the ________.

Accepted Answer

The answer of The majority of businesses go through a...

Question 6

Economies of scale occur when ________.

Accepted Answer

Economies of scale occur when increasing production lowers the average cost of each unit produced. This is because fixed costs are spread across a larger output, resulting in a lower per-unit cost. Additionally, larger production runs may allow for more efficient use of resources and specialized equipment, further reducing costs per unit.

Question 7

Paul Mason's firm sells medical equipment to heart surgeons. The company fields a direct sales force that travels the country demonstrating its equipment to heart surgeons and hospital administrators. Recently, Paul's company started producing equipment for eye surgeons, partly to maximize the value of his sales force, which can now call on both heart surgeons and eye surgeons when it makes hospital visits. Paul's firm is attempting to capture economies of ________ through this strategy.

Accepted Answer

Economies of scope refer to the cost savings that come from leveraging existing resources, such as a sales force, to sell multiple products or services. By expanding into equipment for eye surgeons in addition to heart surgeons, Paul's company is aiming to capture economies of scope by using its existing sales force to sell to a wider range of customers.

Question 8

________ costs are costs that a company incurs whether it sells something or not.

Accepted Answer

Fixed costs are not affected by changes in sales volume and are incurred regardless of whether a company sells anything. Examples include rent, salaries, and insurance premiums.

Question 9

Define the term "market leadership." Why do firms work hard to obtain market leadership?

Accepted Answer

The answer of Define the term "market leadership." Why do...

Question 10

The ________ stage of the organizational life cycle is the startup phase, where a business determines what its core strengths and capabilities are and starts selling its initial product or service.

Accepted Answer

The introduction stage of the organizational life cycle is the startup phase, where a business identifies its core strengths and capabilities and begins selling its initial product or service.

Question 11

Market leadership occurs when a firm ________.

Accepted Answer

Market leadership occurs when a firm is the number one or number two firm in an industry or niche market in terms of sales volume. While net profits, sales volume, and earning twice as much as competitors can be indicators of success, being the top firm in terms of sales volume is the most widely accepted criteria for market leadership.

Question 12

________ costs are costs that a company incurs whether it sells something or not. ________ costs are the costs a company incurs as it generates sales.

Accepted Answer

Fixed costs are incurred regardless of sales, whereas variable costs increase or decrease as sales increase or decrease. Marginal costs refer to the cost of producing one additional unit, which would fall under the category of variable costs. The terms preset, set, and marginal do not accurately reflect these concepts.

Question 13

London Simpson owns a company that makes smartphone accessories. She is trying to increase her sales, primarily because she knows that increasing production lowers the average cost of each unit produced. The reason for growth illustrated in this example is ________.

Accepted Answer

The reason for growth in this scenario is the desire to increase production and lower the average cost of each unit produced, which is achieved through economies of scale.

Question 14

Zack Shields leases a manufacturing facility that produces computer monitors. Zack tries to keep production high, because his lease payments are $10,500 a month, regardless of whether he produces one computer monitor a month or 10,000. Zach's lease payment is a ________ cost.

Accepted Answer

A fixed cost is a cost that remains constant, regardless of the level of production or sales. In this scenario, Zack's lease payment remains the same every month, even if he does not produce any computer monitors or produces a large number of them. Therefore, his lease payment is a fixed cost.

Question 15

Katlyn Williams owns a company that makes specialized components for the aerospace industry. Her most important customer is a company that is growing at a rate of 33% per year. Katlyn is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This example illustrates the reason for growth referred to as ________.

Accepted Answer

The example given highlights the need to accommodate the growth of a key customer as the reason for growth. Therefore, option E is the correct choice. The other options such as capturing economies of scope, executing a scalable business model, market leadership, and influence, power, and survivability may also be reasons for growth, but they are not the primary reason given in this example.

Question 16

________ costs are the costs a company incurs as it makes sales.

Accepted Answer

Variable costs are costs that vary with the amount of goods or services produced or sold. As sales increase, variable costs also increase, and as sales decrease, variable costs decrease. Examples of variable costs include materials, direct labor, and commissions.

Question 17

Some firms feel that they can better appeal to their customers if they can advertise that they are the "Number 1 firm" in their industry. This sentiment is motivated by the reason for growth labeled ________.

Accepted Answer

The sentiment of wanting to advertise as the "Number 1 firm" in the industry indicates a desire for market leadership, which is a reason for growth.

Question 18

A firm's pace of growth is the rate at which it is growing compared to its main competitors.

Accepted Answer

A firm's pace of growth refers to the rate at which it is expanding or growing in terms of revenue, market share, or other financial metrics, not necessarily compared to its main competitors.

Question 19

Karen West owns a barbecue restaurant. One expense that Karen watches closely is the cost of propane, which she uses to heat her ovens. The more barbecue food Karen sells, the more it costs her for propane on a monthly basis. For Karen, the cost of propane is a(n) ________ cost.

Accepted Answer

The fact that the cost of propane varies with the amount of barbecue food Karen sells indicates that it is a variable cost.

Question 20

Fixed costs are the costs a company incurs as it generates sales.

Accepted Answer

Fixed costs are costs that do not vary with the level of sales or production, such as rent, salaries, and insurance. They are incurred regardless of whether or not the company makes any sales.

Quiz 13: Preparing for and Evaluating the Challenges of Growth