1-1
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Chapter 01 Test Bank KEY
1. Supply is a set of products or services a business offers to its customers.
TRUE
Supply is a set of products or services a business offers to its customers.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
2. Consumption utility is composed of price and convenience.
FALSE
Consumption utility is composed of performance and fit.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
3. Firm A Pareto dominates firm B means that firm A’s product or service is inferior to that of
firm B on all dimensions of the customer utility function.
FALSE
Firm A Pareto dominates firm B means that firm A’s product or service is superior to that of firm
B on all dimensions of the customer utility function.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: A Firms Strategic Trade-Offs
4. A firm reduces inefficiencies by making trade-offs.
FALSE
A firm reduces inefficiencies so that it does not have to sacrifice one performance dimension
versus another.
AACSB: Analytical Thinking

1-2
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: Overcoming Inefficiencies: The Three System Inhibitors
5. Reducing inefficiencies will increase a firm’s profitability.
TRUE
Reducing inefficiencies by increasing what the customer is willing to pay and/or decreasing costs
will increase a firm’s profitability.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: Overcoming Inefficiencies: The Three System Inhibitors
6. Every work requires operations.
TRUE
Every work requires operations to do the work and/or to improve the work.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-04 Explain what work in operations management looks like.
Topic: Operations Management: An Overview of the Book
7. "Who are the customers?" is NOT an operations management–related question.
FALSE
"Who are the customers?" is an operations management–related question because it corresponds
to the consumption utility component of the consumer utility function.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-05 Articulate the key operational decisions a firm needs to make to match supply with demand.
Topic: Operations Management: An Overview of the Book
8. The set of products or services a business offers to its customers is called:
A. demand.
B. bundle.
C. supply.
D. value.

1-3
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Supply is the set of products or services offered by a business to its customers. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: Introduction
Topic: The Customers View of the World
9. The set of products or services customers want is called:
A. demand.
B. bundle.
C. supply.
D. value.
Demand is the set of products or services customers want. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: Introduction
Topic: The Customers View of the World
10. "Match supply with demand" means:
A. tell customers what they want.
B. offer customers what they want.
C. explain to customers what they want.
D. invest in marketing.
"Offer customers what they want" is another way of saying "match supply with demand."
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-05 Articulate the key operational decisions a firm needs to make to match supply with demand.
Topic: Introduction
Topic: The Customers View of the World
11. Which of the following is NOT a goal of operations management?
A. Understanding the drivers of customer utility
B. Match supply with demand
C. Make a profit while providing customers what they want
D. Provide great products at low prices to customers
Understanding demand is a goal of marketing. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-05 Articulate the key operational decisions a firm needs to make to match supply with demand.
Topic: Introduction
Topic: The Customers View of the World
12. Which of the following is NOT a challenge of matching supply with demand?
A. Delivering better products at low prices
B. Attempting to predict demand

1-4
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
C. Providing customers with what they want at a low cost
D. Reducing demand to match supply
The challenge of matching supply with demand is to understand demand so that better products or
services are offered to customers at low cost. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 01-05 Articulate the key operational decisions a firm needs to make to match supply with demand.
Topic: Introduction
Topic: The Customers View of the World
13. A customer’s desire for a product or service is measured by its:
A. popularity.
B. costs.
C. utility.
D. advertisement.
According to economic theory, utility measures one’s desire for a product or service. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
14. Economic theory suggests that a customer chooses a product or service to obtain the highest
_______________.
A. demand
B. supply
C. utility
D. satisfaction
A customer chooses a product or service that gives him/her the highest utility. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
15. Utility is composed of the following components EXCEPT:
A. customer loyalty.
B. price.
C. inconvenience.
D. consumption utility.
Utility is composed of consumption utility, price, and inconvenience . AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
16. The features of a product or service that most, if not all, customers prefer are called:

1-5
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
A. consensus attributes.
B. consumption attributes.
C. fit attributes.
D. performance attributes.
Performance attributes are features of a product or service that most, if not all, customers prefer.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
17. The many flavors of ice-cream offered by ice-cream parlors are reflective of the _________
of today’s customers.
A. bargaining power
B. product-fit
C. heterogeneous preferences
D. knowledge base
Customers’ differences in taste, color, or size of the product or services they want are called
heterogeneous preferences. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
18. The inconvenience of obtaining a product or receiving a service is called:
A. transaction cost.
B. fit.
C. timing.
D. unavailability.
Transaction costs refer to the inconvenience of obtaining a product or receiving a service.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember

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1-6
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
20. Price utility includes all of the following EXCEPT:
A. cost of owning the product.
B. shipping cost.
C. financing costs.
D. transaction costs.
Price utility includes the total cost of owning the product or receiving the service. Transaction costs refer
to the inconvenience of obtaining the product or receiving the service. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
21. ____________ is the study of how customers derive utility from products or services.
A. Marketing
B. Operations
C. Economics
D. Management
Marketing is the study of how customers derive utility from products or services. AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
22. Which dimension of the customer utility function is emphasized with a restaurant’s slogan,
"Eat Fresh"?
A. Timing
B. Location

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1-7
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
A. timing
B. location
C. performance
D. fit
Fit captures how well the product or service matches with the unique characteristics of a given customer.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 01-01 Identify the drivers of customer utility.
Topic: The Customers View of the World
24. Which of the following statements about a firm’s capabilities is FALSE?
A. A firm has capabilities to do well on some dimensions of its customers’ utility function.
B. A firm has capabilities to do well on all dimensions of its customers’ utility function.
C. A firm’s capabilities can be defined as the dimensions of the customer’s utility function it is
able to satisfy.

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1-8
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: A Firms Strategic Trade-Offs
26. You are considering four hotels that differ from each other with respect to their price and
customer reviews:
Hotel Price Reviews (1 = worst . . . 5
= best)
H1 $100 2
H2 $250 5
H3 $200 4

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1-9
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
A. H1
B. H2
C. H3
D. H4
A firm that is not on the efficient frontier is inefficient. AACSB: Analytical Thinking
Blooms: Evaluate
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: A Firms Strategic Trade-Offs
28. Beyond just executing the current way of doing things, operations management is about:
A. eliminating inefficiencies to move the firm away from the efficient frontier.
B. making strategic trade-offs to do well on all dimensions of the customers’ utility function.
C. managing inputs and resources to move the firm away from the efficient frontier.

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1-10
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.
Topic: A Firms Strategic Trade-Offs
31. Three restaurants are compared along the dimensions of responsiveness and cost
performance, as shown below:
Which of the following conclusions can be drawn about restaurant C?
A. It is on the efficient frontier.
B. Pareto dominates A.
C. It is inefficient.
D. It is efficient.
Restaurant C is not on the efficient frontier, suggesting that it is inefficient. AACSB: Analytical Thinking
Blooms: Analyze
Difficulty: 3 Hard
Gradable: automatic
Learning Objective: 01-02 Explain inefficiencies and determine if a firm is on the efficient frontier.

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Operations Management, 1e (Mcgraw-hill Education Operations and Decision Sciences) 1st Edition Test Bank

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