Part A (Comprehension)

1. A firm has competitive advantage over its rivals when:

(a) It provides higher consumer surplus from its product line than its rivals provide from their own product lines.

(b) It generates lower profit margin than its rivals.

(c) It generates higher profit margin than its rivals.

(d) Its value creation is higher than the value creation of its rivals.

2. Positive value creation is achieved when:

(a) The product price is above the firm’s cost.

(b) The consumer’s willingness-to-pay is higher than the product’s price.

(c) The consumer’s willingness-to-pay is higher than the firm’s cost.

(d) None of the above.

3. One of the primary activities in the value chain is:

(a) Human resource management.

(b) Technology development.

(c) Firm finance.

(d) Marketing and sales.

4.  If the indifference curve of a customer in the value map is almost flat, then this means that:

(a) The customer benefits a lot from increases in the product’s quality. (b) The customer does not value quality differences that much.

(c) The customer is indifferent to changes to quality.

(d) The customer is indifferent to changes to the price.