Consider an Incumbent Successfully Links the Preentry Price and Postentry

question 40

Multiple Choice

Consider an incumbent successfully links the preentry price and postentry profit to prevent entry.The incumbent's monopoly profit is $10 million.If a rival successfully enters the market, the incumbent's profits will fall to $4 million.If the incumbent lowers output to 25,000 units, its rival will stay out of the market resulting in an infinite stream of profits of $8 annually.Due to a recent loan default, the current interest rate is whopping 210 percent.Is limit pricing profitable for the incumbent?

• A)Yes, since $19.05 million is greater than $2 million.
• B)No, since $1.91 million is less than $2 million.
• C)No since $4 million is less than $4.2 million.
• D)Linking the preentry price to the postentry profit is sufficient to guarantee the profitability of limit pricing.

Understand the distinction between push and pull promotion strategies.

Grasp the concept of promotional positioning and its significance in marketing.

Identify the role of product positioning in consumer perception.

Recognize the critical elements involved in creating and maintaining a product image through advertising.

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Definitions:

Direct Material

Raw materials that are directly incorporated into a finished product and can be easily traced.

Indirect Material

Materials used in the production process that can't be directly traced to a finished product, such as lubricants and cleaning supplies.

Storeroom

A designated space for storing inventory, tools, and materials, often found in a manufacturing or production facility.

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including labor, material, and overhead costs.