To Deter a Potential Entrant, an Existing Firm in a Market

question 135

Multiple Choice

To deter a potential entrant, an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market. This may be a credible threat if:

• A) production exhibits economies of scale.
• B) production exhibits diseconomies of scale.
• C) production costs may fall due to learning-by-doing.
• D) A and C are correct.
• E) B and C are correct.

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Definitions:

Depressant

A category of drugs that reduce neural activity and slow down the functions of the brain and body.

Stimulant

Substances that raise levels of physiological or nervous activity in the body, often enhancing alertness and energy.

Suprachiasmatic Nucleus

A tiny region in the brain's hypothalamus responsible for controlling circadian rhythms, influencing sleep-wake cycles based on light information received from the eyes.

Hypothalamus

A small region of the brain that plays a crucial role in many important functions, including releasing hormones and regulating body temperature.