When Entry and Exit Barriers Are High,________

question 44

Multiple Choice

When entry and exit barriers are high,________.

• A) profit potential is high, but firms face more risk because poorer-performing firms stay in and fight it out
• B) firms easily enter and leave the industry, and returns are stable and low
• C) few new firms can enter the industry, and poorly performing firms can easily exit
• D) firms enter during good times but find it hard to leave during bad times, resulting in chronic overcapacity and depressed earnings for all
• E) none of the above

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Definitions:

Creditor

A creditor is an entity (person or institution) that lends money or extends credit to another entity, expecting repayment in the future.

Contingent Liability

A possible monetary liability that could arise based on the result of an upcoming event.

Estimable

Capable of being estimated or approximated in quantity or degree.

Remote Event

An event or condition with a very low chance of occurring, often considered insignificant in financial forecasting and analysis.