Quiz 6 - Entry and Exit Decision

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? b) Judo Entry d) Accommodated Entry c) Stealth Entry a) Deterred Entry e) Blockaded Entry

a) Deterred Entry

Which of the following methods is believed to be used by Brazilian cement makers to prevent entry into the market? b) Price leading a) Limit pricing d) Quality pricing e) Capacity expansion c) Predatory pricing

a) Limit pricing

Which of the following terms refers to the practice whereby an incumbent firm discourages entry by charging a low price before entry occurs? a) Limit pricing d) Quality pricing e) Capacity expansion b) Price leading c) Predatory pricing

a) Limit pricing

What was the cause of Walmart's exit from the German market? a) Loss of a predatory pricing lawsuit b) High tariffs on imported goods d) German regulations against foreign owned firms c) Total revenue that failed to cover sunk costs e) None of the above

a) Loss of a predatory pricing lawsuit

Which of the following generally accompanies firms that survive as market entrants? e) None of the above c) Higher average revenue than incumbents d) Small size allowing fast decision making b) Lower marginal costs than incumbents a) Precipitous growth

a) Precipitous growth

When are sunk costs a most effective entry barrier? 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 c) When channels are few and hard to replicate b) When incumbents have long-standing relationships with suppliers and customers a) When the incumbent has incurred them, and the entrant has not

a) When the incumbent has incurred them, and the entrant has not

What term describes when a firm sells a combination of goods and services at a price below what the individual items would cost? b) Combining e) Assembling d) Mixing a) Packaging c) Bundling

c) Bundling

How can incumbents legally erect entry barriers around novel and non-obvious products or production processes? d) Formation of a cartel e) Price fixing b) Predatory pricing a) Collusive pricing c) Patents

c) Patents

What situation occurs when a large incumbent sets a low price to drive smaller rivals from the market? c) Predatory pricing d) Quality pricing b) Price leading e) Capacity expansion a) Limit pricing

c) Predatory pricing

What are the two types of barriers to entry? a) Legal and strategic c) Structural and strategic e) Price and Structure b) Price and Size d) Size and Legal

c) Structural and strategic

What type of entry exists if structural entry barriers are low, and either (1) entry-deterring strategies will be ineffective or (2) the cost to the incumbent of trying to deter entry exceeds the benefits it could gain from keeping the entrant out? a) Deterred Entry c) Stealth Entry d) Accommodated Entry e) Blockaded Entry b) Judo Entry

d) Accommodated Entry

Which of the following best describes an incumbent firm? d) One that is already operating in a particular market c) One that faces no competition in its market b) One that just exited a market e) None of the above a) One that just recently entered a market

d) One that is already operating in a particular market

Which of the following is a potential risk of a brand umbrella? a) The brand umbrella reduces the incumbents sunk cost of introducing a new product b) The umbrella brand may help the incumbent navigate the vertical chain d) A brand umbrella may make suppliers and distributors more willing to enter relationship specific investments in or sell credit to incumbents e) If a new product under the umbrella fails, consumers may become disenchanted with the entire brand c) The brand umbrella allows an incumbent offset uncertainty about the quality of a new product

e) If a new product under the umbrella fails, consumers may become disenchanted with the entire brand

Which of the following is not a condition under which an incumbent firm can successfully deter entry by holding excess capacity? a) The investment in excess capacity must be sunk prior to entry e) The excess capacity investment must be recoverable 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

Which of the following is a method a monopolist firm would not use to prevent entry into a market? b) Predatory pricing e) Utilizing excess capacity for generic branded products c) Capacity expansion d) Strict patent enforcement a) Limit pricing

e) Utilizing excess capacity for generic branded products