If a New Entrant Hopes to Attract Customers from an Established

question 36

Multiple Choice

If a new entrant hopes to attract customers from an established incumbent, the new entrant must ensure that the value they offer exceeds the incumbents' value in addition to any perceived _____.

• A) switching costs
• B) market depreciation
• C) brand benefits
• D) advertising expenses
• E) scale advantages

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Definitions:

Market Failure

A situation in which a market left on its own fails to allocate resources efficiently.

Free-Ride

A situation in which an individual benefits from resources, goods, or services without contributing to the cost.

Private Markets

Markets where transactions occur directly between parties without public exchange involvement, often characterized by less regulation.

Socially Optimal Level

A state of resource allocation where the benefits to society are maximized, considering all externalities.