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# Firm X is considering entry into an industry. To analyze competition within the industry, Firm X evaluated its strategic
groups. According to Michael E. Porter,

A. The members of a strategic group pursue different competitive strategies.
B. Intergroup competition is increased by market interdependence.
C. Low barriers to mobility among strategic groups promote profitability.
D. High substitutability of products reduces competition among groups.

Correct Answer: B

Intergroup competition is increased by market interdependence, which is the extent to which groups pursue the same
customers. The greater the interdependence, the stronger the competition among groups.

# A key advantage of developing a computer application by using the prototyping approach is that it:

A. Does not require testing for user acceptance.
B. Allows applications to be portable across multiple system platforms.
C. Is less expensive since it is self-documenting.
D. Better involves users in the design process.

Correct Answer: D

# Which of the following best describes the concept of relevant cost?

A. A future cost that is the same among alternatives.
B. A future cost that differs among alternatives.
C. A past cost that is the same among alternatives.
D. A past cost that differs among alternatives.

Correct Answer: B

# Numerous factors enhance or detract from a group\’s attractiveness and cohesiveness. Select the factor that enhances cohesiveness.

A. Favorable view from the outside-looking-in.
B. Wide variety of members.
C. A common threat in the environment.
D. Moderately large size.

Correct Answer: C

Commitment to a group depends on its attractiveness and cohesiveness. The latter quality is the tendency of members
to adhere to the group and resist outside influences.

Factors that enhance group attractiveness and cohesiveness are prestige, status, a cooperative relationship, a high degree of interaction, small size, the similarity of members, a superior public image, and a common threat in the environment.

# Which of the following is a result of implementing an e-commerce system, which relies heavily on electronic data
interchange and electronic funds transfer, for purchasing and billing?

A. Higher cash flow and treasury balances.
B. Higher inventory balances.
C. Higher accounts receivable
D. Higher accounts payable.

Correct Answer: D

# Which of the following roles would be least appropriate for the internal audit activity to undertake with regard to an
organization\\’s corporate social responsibility (CSR) program?

A. Consult on project design and implementation of the CSR program.
B. Serve as an advisor on internal controls related to CSR.
C. Identify and prioritize the CSR issues that are important to the organization.
D. Evaluate the effectiveness of the organization\\’s CSR efforts.

Correct Answer: C

# Which of the following is false with regard to email policies?

A. Employees may use informal writing because email is often informal in nature.
B. Employees should understand that the organization has a legal right to monitor the employees\\’ use of the email
C. Filters should be used to protect against spam.
D. Emails should be concisely written.

Correct Answer: A

The principles of good writing still apply to emails. Therefore, emails should be written like any other formal
communication within the organization.

# A manager who is authorized to make purchases up to a certain dollar amount approves the set-up of a fictitious vendor and subsequently initiates purchase orders.
Which of the following controls would best address this risk?

A. Establish separate vendor creation and approval teams.
B. Develop and distribute a code of conduct that prohibits conflicts of interest.
C. Perform a regular review of the vendor master file.
D. Require submission of a conflict-of-interest declaration.

Correct Answer: B

# Which component of an organization\\’s cybersecurity risk assessment framework would allow management to
implement user controls based on a user\\’s role?

A. Prompt response and remediation policy.
B. Inventory of information assets.
C. Information access management.
D. Standard security configurations.

Correct Answer: C

# Firms in a fragmented industry have insignificant market shares and little influence on such matters as market price and
total output. A likely economic cause of this fragmentation is the existence of:

A. A learning curve effect.
B. Diseconomies of scale.
C. High entry barriers.
D. Low exit barriers.

Correct Answer: B

Important diseconomies of scale may favor fragmentation. For example, small, flexible firms have an advantage when
the following needs are important:

quick responses to style changes, the maintenance of low overhead, customization of a diverse product line to the special requirements of particular customers, substantial creative content in the product,
individualized personal service, and local contacts and image.

# The decision to engage in the vertical integration of a firm is in large part a function of an analysis of throughput and
economies of scale. If throughput is less than the efficient scale, the firm:

A. Should acquire a capability equal to the firm\\’s throughput.
B. Must sell or buy in the open market if the firm vertically integrates at an efficient scale.
C. Should engage in quasi-integration.
D. Should not vertically integrate.

Correct Answer: B

Upstream (backward) or downstream (forward) integration is the acquisition of a capability that otherwise would be
performed by external parties that are suppliers or customers, respectively, of the firm.

Whether the integration should occur depends on the firm\\’s volume of transactions with the external parties (throughput) and the magnitude of the capability required to achieve necessary economies of scale.

If the integrating firm\\’s need is for a capability less than the efficient scale, one of its options is to acquire a capability with a cost-inefficient scale. The other option is to acquire an efficient capability that provides excess output (in the upstream case) creates excess demand (from, for example, a distribution capability in the downstream case).

This option will require the integrated firm to sell or buy in the open market. Thus, the second option carries the risk of having to deal with competitors.

# Conflict may be:

I. Cooperative
II. Competitive

A. I only.
B. II only.
C. Both l and ll.
D. Neither I nor II

Correct Answer: C

Conflict may be either cooperative or competitive. Cooperative conflict is constructive and competitive conflict is

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