Joe Sullivan and Mark Holland, Members of the Top Management

question 95

Multiple Choice

Joe Sullivan and Mark Holland, members of the top management at EuAir, a European airlines, were preparing for a meeting to discuss strategies to combat the recent rise in fuel prices. Before the meeting began, Joe and Mark were discussing how oil prices significantly impact the health of the world economy. Joe spoke of how higher oil prices since 1999, partly the result of OPEC supply management policies, contributed to the global economic downturn in 2000-2001. Mark agreed but added that the right kind of strategy could help them overcome this challenge, and that they could even use the situation to hike fares and generate additional revenues.
-Which of the following statements, if true, would denote the occurrence of groupshift in Mark's opinions during the meeting?

• A)Mark thought that EuAir should suspend some of its less profitable flights in the short run in favor of the routes that have greater demand among consumers.
• B)Mark proposed that this was an opportunity for EuAir to use its brand name effectively and diversify into other products and services.
• C)Mark agreed with Joe's opinion that providing the best service possible, even if it meant incurring a loss in the short run, would be the best strategy.
• D)Mark proposed that the prices be hiked and additional customer service measures be included so costumers have the best experience flying with EuAir.
• E)Mark encouraged the top-management team to consider laying off surplus employees and rightsizing EuAir to enhance its efficiency and lower costs.

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Definitions:

Profit-Maximizing

A strategy or approach focused on increasing a firm’s profits to the highest possible level given its production costs and market demand.

Downward-Sloping

A characteristic of demand curves where price and quantity demanded move in opposite directions.

ATC Curve

A graphical representation of the average total cost of producing various quantities of output, showing how unit costs change with changes in output level.

AVC Curve

A graph that represents the average variable cost of producing each quantity of output, showing how these costs vary with changes in output levels.