Note Cards

(T/F)

Firms that are successful in pursuing a cost-leadership strategy focus solely on keeping costs low and abandoning other business or corporate strategies.

FALSE

(T/F)

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs per unit of production begin to rise because of diseconomies of scale.

TRUE

(T/F)

Increased worker specialization associated with higher levels of production can lead to worker de-motivation and diseconomies of scale.

TRUE

(T/F)

The link between cumulative volumes of production and cost has been formalized in the concept of the learning curve.

TRUE

Actions that firms take to gain competitive advantage in a single market or industry are known as:

business-level strategies.

________ are said to exist when the increase in firm size (measured in terms of volume of production) are associated with lower costs (measured in terms of average costs per unit of production).

Economies of scale

Which of the following is not a potential source of diseconomies of scale?

Learning-curve economies

Learning-curve-cost advantages are:

not restricted to manufacturing.

When managers committed to an incorrect course of action increase their commitment to this action even as its limitations become manifest, this is known as:

escalation of commitment.

Which of the following statements about cost leadership and the threat of buyers is accurate?

If buyers demand increased quality or service, cost leaders can absorb these costs and may still have a cost advantage over the competition.

(T/F)

Product differentiation is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products and services relative to the perceived value of other firms' products or services.

TRUE

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