Which of the Following Statements Concerning the Competitive Environment Is

question 66

Multiple Choice

Which of the following statements concerning the competitive environment is true?

• A) High fixed costs encourage firms to produce at a low level of capacity, in order to minimize fixed cost per unit produced.
• B) Low current prices relative to costs in an industry indicate low barriers to entry.
• C) Substantial economies of scale do not give a current industry member an advantage over a new firm.
• D) The ability to substitute another product limits the industry's profit potential.
• E) Buyers and suppliers do not influence the profitability of an industry.

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Definitions:

Legal Entity

An organization or structure that is recognized by law as capable of legal rights and obligations, such as a corporation or partnership.

Aggregate

A total or sum, often used in contexts involving the collection of different items or amounts into a single whole.

Contracts

Legally binding agreements between two or more parties that are enforceable by law.

Economic Purpose

The underlying financial or economic reasons behind business transactions, investments, or policy decisions.