The Process of "Creative Destruction" in an Oligopolistic Industry Suggests

question 125

Multiple Choice

The process of "creative destruction" in an oligopolistic industry suggests that

• A)profits are driven to zero by the entry of new firms.
• B)no firm can survive in the long run.
• C)firms can enter and leave without incurring any sunk costs of entry.
• D)there are no costs of exit in oligopoly.
• E)the prospect of keeping the resulting profits provides an incentive for firms to innovate.

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Definitions:

Batch-level Activity

Activities that are performed every time a batch of goods is handled or processed, regardless of the quantity of units in the batch.

Unit-level Activity

Activities that vary directly with the number of units produced or services rendered, such as using materials or consuming power.

First-stage Allocation

The process in managerial accounting where overhead costs are allocated to various departments or cost centers as a preliminary step.

Special Cost Pool

A financial management term for aggregating specific costs together, typically for reporting or reimbursement purposes.