Question 1

Which of the following is not an exit barrier for firms in an industry?

Accepted Answer

A) Sunk costs 
B) Labor agreements or commitments to purchase raw materials 
C) Obligations to input suppliers 
D) Excess capacity 
E) Government restrictions 
A) Sunk costs 
B) Labor agreements or commitments to purchase raw materials 
C) Obligations to input suppliers 
D) Excess capacity 
E) Government restrictions D

Question 2

Which of the following is not a condition under which an incumbent firm can successfully deter entry by holding excess capacity?

Accepted Answer

A) The investment in excess capacity must be sunk prior to entry 
B) The incumbent should have a sustainable cost advantage 
C) Market demand growth should be slow 
D) The potential entrant should not itself be attempting to establish a reputation for toughness 
E) The excess capacity investment must be recoverable prior to entry 
A) The investment in excess capacity must be sunk prior to entry 
B) The incumbent should have a sustainable cost advantage 
C) Market demand growth should be slow 
D) The potential entrant should not itself be attempting to establish a reputation for toughness 
E) The excess capacity investment must be recoverable prior to entry E

Question 3

What are the two types of barriers to entry?

Accepted Answer

A) Legal and strategic 
B) Price and Size 
C) Structural and strategic 
D) Size and Legal 
E) Price and Structure 
A) Legal and strategic 
B) Price and Size 
C) Structural and strategic 
D) Size and Legal 
E) Price and Structure C

Question 4

What is the typical "capacity use" ratio as reported by plant managers to the U.S.Census of Manufacturers annually?

Accepted Answer

A) 40% 
B) 50% 
C) 60% 
D) 70% 
E) 80% 
A) 40% 
B) 50% 
C) 60% 
D) 70% 
E) 80%

Question 5

When are sunk costs a most effective entry barrier?

Accepted Answer

A) When the incumbent has incurred them and the entrant has not 
B) When incumbents have long-standing relationships with suppliers and customers 
C) When channels are few and hard to replicate 
D) When a firm has a reputation for toughness or competes in multiple markets 
E) When marginal costs are low and flooding the market causes large price reductions 
A) When the incumbent has incurred them and the entrant has not 
B) When incumbents have long-standing relationships with suppliers and customers 
C) When channels are few and hard to replicate 
D) When a firm has a reputation for toughness or competes in multiple markets 
E) When marginal costs are low and flooding the market causes large price reductions

Question 6

What term represents the conduct and performance of firms in the market after entry has occurred?

Accepted Answer

A) Postentry competition 
B) Postentry actions 
C) Postentry procedures 
D) Postentry diversification 
E) Postentry strategic decisions 
A) Postentry competition 
B) Postentry actions 
C) Postentry procedures 
D) Postentry diversification 
E) Postentry strategic decisions

Question 7

Which of the following is an exit barrier for firms in an industry?

Accepted Answer

A) Sunk costs 
B) Labor agreements or commitments to purchase raw materials 
C) Obligations to input suppliers 
D) Government restrictions 
E) All of the above 
A) Sunk costs 
B) Labor agreements or commitments to purchase raw materials 
C) Obligations to input suppliers 
D) Government restrictions 
E) All of the above

Question 8

How can incumbents legally erect entry barriers around novel and non-obvious products or production processes?

Accepted Answer

A) Copyrights 
B) Exclusive franchise agreements 
C) Patents 
D) None of the above 
E) All of the above 
A) Copyrights 
B) Exclusive franchise agreements 
C) Patents 
D) None of the above 
E) All of the above

Question 9

What type of entry exists if (1)the incumbent can keep the entrant out by employing an entry-deterring strategy and (2)employing the entry-deterring strategy boosts the incumbent's profits?

Accepted Answer

A) Deterred Entry 
B) Judo Entry 
C) Stealth Entry 
D) Accommodated Entry 
E) Blockaded Entry 
A) Deterred Entry 
B) Judo Entry 
C) Stealth Entry 
D) Accommodated Entry 
E) Blockaded Entry

Question 10

Which of the following is a method a monopolist firm might use to prevent entry into a market?

Accepted Answer

A) Limit pricing 
B) Predatory pricing 
C) Capacity expansion 
D) All of the above 
E) None of the above 
A) Limit pricing 
B) Predatory pricing 
C) Capacity expansion 
D) All of the above 
E) None of the above

Question 11

When is reputation a most effective entry barrier?

Accepted Answer

A) When the incumbent has incurred them and the entrant has not 
B) When incumbents have long-standing relationships with suppliers and customers 
C) When channels are few and hard to replicate 
D) When a firm has a reputation for toughness or competes in multiple markets 
E) When marginal costs are low and flooding the market causes large price reductions 
A) When the incumbent has incurred them and the entrant has not 
B) When incumbents have long-standing relationships with suppliers and customers 
C) When channels are few and hard to replicate 
D) When a firm has a reputation for toughness or competes in multiple markets 
E) When marginal costs are low and flooding the market causes large price reductions

Question 12

What was the cause of Walmart's exit from the German market?

Accepted Answer

A) Loss of a predatory pricing lawsuit 
B) High tariffs on imported goods 
C) Total revenue that failed to cover sunk costs 
D) German regulations against foreign owned firms 
E) None of the above 
A) Loss of a predatory pricing lawsuit 
B) High tariffs on imported goods 
C) Total revenue that failed to cover sunk costs 
D) German regulations against foreign owned firms 
E) None of the above

Question 13

Which of the following conditions may make predatory pricing by incumbents rational?

Accepted Answer

A) When entry costs are very high 
B) When entrants are uncertain about market conditions 
C) When existing firms have significant coast advantages 
D) When entrants are required to obtain extensive licensing and regulatory approvals 
E) When exiting firms have increasing marginal revenue 
A) When entry costs are very high 
B) When entrants are uncertain about market conditions 
C) When existing firms have significant coast advantages 
D) When entrants are required to obtain extensive licensing and regulatory approvals 
E) When exiting firms have increasing marginal revenue

Question 14

What situation occurs if an incumbent firm with increasing marginal costs or limited capacity sets a price just below the entrants' marginal costs even though the incumbent may be unable to meet all market demand (or possibly may have to sacrifice its profits to do so)?

Accepted Answer

A) Contestable limit pricing 
B) Strategic limit pricing 
C) Predatory pricing 
D) Quality pricing 
E) Capacity expansion 
A) Contestable limit pricing 
B) Strategic limit pricing 
C) Predatory pricing 
D) Quality pricing 
E) Capacity expansion

Question 15

What type of entry exists if structural barriers are so high the incumbent need do nothing to deter entry?

Accepted Answer

A) Deterred Entry 
B) Judo Entry 
C) Stealth Entry 
D) Accommodated Entry 
E) Blockaded Entry 
A) Deterred Entry 
B) Judo Entry 
C) Stealth Entry 
D) Accommodated Entry 
E) Blockaded Entry

Question 16

Which term describes the situation where a smaller firm and potential entrant can use the incumbent's size to its own advantage?

Accepted Answer

A) Jujitsu economics 
B) Karate economics 
C) Boxing economics 
D) Judo economics 
E) David and Goliath economics 
A) Jujitsu economics 
B) Karate economics 
C) Boxing economics 
D) Judo economics 
E) David and Goliath economics

Question 17

What situation occurs when a large incumbent sets a low price to drive smaller rivals from the market?

Accepted Answer

A) Limit pricing 
B) Price leading 
C) Predatory pricing 
D) Quality pricing 
E) Capacity expansion 
A) Limit pricing 
B) Price leading 
C) Predatory pricing 
D) Quality pricing 
E) Capacity expansion

Question 18

What term is defined as a firm selling goods at a price below their normal price (and generally below cost)usually as an export in international trade?

Accepted Answer

A) Predatory pricing 
B) Cost plus pricing 
C) Dumping 
D) Marginal cost pricing 
E) Price leading 
A) Predatory pricing 
B) Cost plus pricing 
C) Dumping 
D) Marginal cost pricing 
E) Price leading

Question 19

What term best describes the paradox which says despite the conclusion that predatory pricing to deter entry appears irrational,many firms are commonly perceived as slashing prices to deter entry?

Accepted Answer

A) Cloud paradox 
B) Credit paradox 
C) Entry paradox 
D) Chain-store paradox 
E) Pricing paradox 
A) Cloud paradox 
B) Credit paradox 
C) Entry paradox 
D) Chain-store paradox 
E) Pricing paradox

Question 20

Which of the following is a method a monopolist firm would not use to prevent entry into a market?

Accepted Answer

A) Limit pricing 
B) Predatory pricing 
C) Capacity expansion 
D) Strict patent enforcement 
E) Utilizing excess capacity for generic branded products 
A) Limit pricing 
B) Predatory pricing 
C) Capacity expansion 
D) Strict patent enforcement 
E) Utilizing excess capacity for generic branded products

Which of the following is not an exit barrier for firms in an industry?

Which of the following is not a condition under which an incumbent firm can successfully deter entry by holding excess capacity?

What are the two types of barriers to entry?

What is the typical "capacity use" ratio as reported by plant managers to the U.S.Census of Manufacturers annually?

When are sunk costs a most effective entry barrier?

What term represents the conduct and performance of firms in the market after entry has occurred?

Which of the following is an exit barrier for firms in an industry?

How can incumbents legally erect entry barriers around novel and non-obvious products or production processes?

What type of entry exists if (1)the incumbent can keep the entrant out by employing an entry-deterring strategy and (2)employing the entry-deterring strategy boosts the incumbent's profits?

Which of the following is a method a monopolist firm might use to prevent entry into a market?

When is reputation a most effective entry barrier?

What was the cause of Walmart's exit from the German market?

Which of the following conditions may make predatory pricing by incumbents rational?

What situation occurs if an incumbent firm with increasing marginal costs or limited capacity sets a price just below the entrants' marginal costs even though the incumbent may be unable to meet all market demand (or possibly may have to sacrifice its profits to do so)?

What type of entry exists if structural barriers are so high the incumbent need do nothing to deter entry?

Which term describes the situation where a smaller firm and potential entrant can use the incumbent's size to its own advantage?

What situation occurs when a large incumbent sets a low price to drive smaller rivals from the market?

What term is defined as a firm selling goods at a price below their normal price (and generally below cost)usually as an export in international trade?

What term best describes the paradox which says despite the conclusion that predatory pricing to deter entry appears irrational,many firms are commonly perceived as slashing prices to deter entry?

Which of the following is a method a monopolist firm would not use to prevent entry into a market?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Performance Measurement and Incentives

Strategy and Structure

Environment, Power, and Culture

Economics Primer

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Exam 6: Entry and Exit

Which of the following is not an exit barrier for firms in an industry?

Which of the following is not a condition under which an incumbent firm can successfully deter entry by holding excess capacity?

What are the two types of barriers to entry?

What is the typical "capacity use" ratio as reported by plant managers to the U.S.Census of Manufacturers annually?

When are sunk costs a most effective entry barrier?

What term represents the conduct and performance of firms in the market after entry has occurred?

Which of the following is an exit barrier for firms in an industry?

How can incumbents legally erect entry barriers around novel and non-obvious products or production processes?

What type of entry exists if (1)the incumbent can keep the entrant out by employing an entry-deterring strategy and (2)employing the entry-deterring strategy boosts the incumbent's profits?

Which of the following is a method a monopolist firm might use to prevent entry into a market?

When is reputation a most effective entry barrier?

What was the cause of Walmart's exit from the German market?

Which of the following conditions may make predatory pricing by incumbents rational?

What situation occurs if an incumbent firm with increasing marginal costs or limited capacity sets a price just below the entrants' marginal costs even though the incumbent may be unable to meet all market demand (or possibly may have to sacrifice its profits to do so)?

What type of entry exists if structural barriers are so high the incumbent need do nothing to deter entry?

Which term describes the situation where a smaller firm and potential entrant can use the incumbent's size to its own advantage?

What situation occurs when a large incumbent sets a low price to drive smaller rivals from the market?

What term is defined as a firm selling goods at a price below their normal price (and generally below cost)usually as an export in international trade?

What term best describes the paradox which says despite the conclusion that predatory pricing to deter entry appears irrational,many firms are commonly perceived as slashing prices to deter entry?

Which of the following is a method a monopolist firm would not use to prevent entry into a market?

The Power of Principles: A Historical Perspective

The Horizontal Boundaries of the Firm

The Vertical Boundaries of the Firm

Integration and Its Alternatives

Competitors and Competition

The Dynamics Competing Across Time

Industry Analysis

Strategic Positioning for Competitive Advantage

Information and Value Creation

Sustaining Competitive Advantage

Performance Measurement and Incentives

Strategy and Structure

Environment, Power, and Culture

Economics Primer

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