In Discussions of Barriers to Entry, What Is Meant by the Term

question 136

Multiple Choice

In discussions of barriers to entry, what is meant by the term "virtuous cycle"?

• A)A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products.
• B)A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market.
• C)A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the "invisible hand").
• D)A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers.

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Definitions:

Long Stock Position

The ownership of shares in a company with the expectation that they will increase in value over time.

Russell 2000

An index measuring the performance of approximately 2000 small-cap companies in the United States.

Large-cap Indexes

Large-cap Indexes track the performance of stocks from companies with large market capitalization, reflecting the overall health and trends of major corporations.

Nasdaq Composite

An index of all the stocks and similar investments listed on the Nasdaq stock market, often used as a benchmark for technology and biotech securities.