Multiple Choice
Which one of the following is a correct statement about positive and normative analysis, all else held constant?
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0. Basic Principles of Economics
Positive and Normative Analysis
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When a firm's static fit does not match the competitive reality, the firm experiences strategic:
A
equilibrium
B
misalignment
C
efficiency
D
advantage
Verified step by step guidance1
Step 1: Understand the key terms in the problem. 'Static fit' refers to how well a firm's current strategy aligns with the existing market conditions or competitive environment at a given point in time.
Step 2: Recognize that when a firm's strategy does not align with the competitive reality, it means the firm is not effectively responding to market forces or competitors' actions.
Step 3: Identify that this lack of alignment leads to a situation where the firm's strategy is out of sync with the environment, which is commonly referred to as 'misalignment'.
Step 4: Differentiate 'misalignment' from other terms: 'equilibrium' implies a stable state, 'efficiency' relates to optimal resource use, and 'advantage' refers to a favorable position. None of these capture the idea of a mismatch between strategy and reality.
Step 5: Conclude that the correct term describing the firm's experience when its static fit does not match competitive reality is 'misalignment'.
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