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.

---

Definitions:

Contracted Muscle

A state of muscle that is actively shortened, typically in response to a nerve impulse, facilitating movement.

Muscle Activity

The action of muscle fibers contracting and relaxing, which results in movement or the maintenance of posture.

Chemical Reactions

Processes in which one or more substances are chemically changed into one or more new substances.

Pyrogens

Substances that cause fever by acting on the hypothalamus's temperature-regulating center.