Consider the Following Characteristics of a Particular Industry

question 27

Multiple Choice

Consider the following characteristics of a particular industry:
- there is freedom of entry and exit
- in long- run equilibrium, each firm is producing a level of output where there are increasing returns to scale
This industry is likely to be

• A) highly concentrated.
• B) perfectly competitive.
• C) monopolistically competitive.
• D) an oligopoly.
• E) a cartel.

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Definitions:

Leveraged Buyouts (LBOs)

Transaction in which a firm’s publicly owned stock is acquired in a mostly debt-financed tender offer, and a privately owned, highly leveraged firm results. Often, the firm’s own management initiates the LBO.

Private Equity Groups

Firms that invest in private companies, often acquiring significant or controlling stakes, with the intention of improving performance and increasing value before eventually selling the investment for a profit.

Borrowed Money

Funds that have been obtained through loans or debt, which typically incur interest charges and are required to be repaid.

Competitive Strategy

Approaches that a company adopts to gain an edge over its competitors, such as cost leadership, differentiation, or focus strategies.