Chapter 6 Quiz
Which of the following is an exit barrier for firms in an industry?
all of the above
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?
chain-store paradox
Which of the following is a potential risk of a brand umbrella?
if a new product under the umbrella fails, consumers may become disenchanted with the entire brand
Which term describes the situation where a smaller firm and potential entrant can use the incumbent's size to its own advantage?
judo economics
Which of the following terms refers to the practice whereby an incumbent firm discourages entry by charging a low price before entry occurs?
limit pricing
What term describes a market where a monopolist cannot raise price above long run average cost?
perfectly contestable
Which of the following generally accompanies firms that survive as market entrants?
precipitous growth
What term describes when a firm sells a combination of goods and services at a price below what the individual items would cost?
predatory pricing
What are the two types of barriers to entry?
structural and strategic
What term describes a situation where two or more parties expend resources battling each other?
war of attrition
Which of the following conditions may make predatory pricing by incumbents rational?
when entrants are uncertain about market conditions