Competitive Pressures Associated with the Threat of Entry Are Greater

question 123

Multiple Choice

Competitive pressures associated with the threat of entry are greater when

• A) incumbent firms are unable or unwilling to strongly contest the entry of newcomers.
• B) newcomers can expect to earn attractive profits and a number of outsiders have the expertise and resources to hurdle whatever entry barriers exist.
• C) entry barriers are relatively low and buyer demand for the product is growing fairly rapidly.
• D) existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence.
• E) All of these conditions heighten the competitive pressures associated with fresh entry into the industry.

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Definitions:

Annual Interest Payment

The total amount of interest to be paid each year on a loan, bond, or other financial instrument.

Straight-line Method

A depreciation method that allocates an equal portion of the initial cost of an asset to each year of its useful life.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, accounting for time value of money.

Compounded Annually

A method of calculating interest where the interest is added to the principal at the end of each year, and the following year's interest is calculated on the total amount.