SCENARIO 12-7 Microchip Technology Is at the Heart of Everything

question 103

Multiple Choice

SCENARIO 12-7 Microchip technology is at the heart of everything electronic.The stakes for manufacturers are high and market fluctuation makes for an uncertain future.Jim Forrest is CEO of BigChip Inc.,a medium-sized company that manufactures specialty microchips used in a variety of computers to facilitate efficient graphics processing.Jim recognizes the need to diversify his manufacturing operations and is considering starting up a new division,which would design,develop and produce security chips.These would be used in situations ranging from data transmission to securing financial transactions.Other companies are also considering involvement since the security market is potentially a large one.Jim knows that the rapid advancements in the field of computer hardware and software necessitates an innovative approach to development of any new technology.Jim realizes that responding to market conditions and world economic influence will have to be carefully dealt with.
-Refer to Scenario 12-7.Jim knows that expansion into new technology will have to be carefully managed.Managers,in many instances,are content with reasonable rather than best-possible solutions.A weakness of rational decision-making in Jim's situation is the assumption that

• A)there are no time or cost constraints.
• B)decisions will never be made that produce the highest perceived value.
• C)decision criteria vary over time.
• D)all possible consequences of each alternative are unknown.
• E)criteria weights remain constant at all times.

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Definitions:

Elastic

Elastic refers to the responsiveness of the quantity demanded or supplied of a good or service to a change in its price, with high elasticity meaning significant responsiveness.

Average Variable Cost

The cost variable per unit of output produced, calculated by dividing total variable costs by the quantity of output.

Economic Losses

The reduction in financial wealth, goods, or services that results from an event or decision.

Long Run Market Supply Curve

A curve showing the relationship between the price of a good and its supply over a longer period, when all input factors can be varied.