Potential Entrants Are More Likely to Be Deterred from Actually

question 92

Multiple Choice

Potential entrants are more likely to be deterred from actually entering an industry when

• A)incumbent firms are willing and able to be aggressive in defending their market positions against entry.
• B)incumbent firms are complacent.
• C)buyers are not particularly price-sensitive and the industry already contains a dozen or more rivals.
• D)the relative cost positions of incumbent firms are about the same, such that no one incumbent has a meaningful cost advantage.
• E)buyer switching costs are moderately low because of strong product differentiation among incumbent firms.

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Definitions:

Units-Of-Production

A depreciation method that allocates expense based on the actual usage or production levels of an asset.

Double-Declining-Balance

A method of accelerated depreciation that doubles the straight-line depreciation rate, reducing the asset's book value more quickly in the early years of its life.

Straight-Line Method

A method of calculating the depreciation of an asset where the asset's cost is evenly spread over its useful life.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense since the asset was put into use.