In Deciding Whether to Invest in Excess Capacity in Order

question 28

Multiple Choice

In deciding whether to invest in excess capacity in order to deter entry,incumbents should consider all of the following except

• A) the order of play in pricing and capacity choice decisions
• B) the customer sorting pattern
• C) the sunk cost required to achieve excess capacity
• D) the joint-profit-maximizing cartel output
• E) the potential entrant's projected profitability

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Definitions:

Head-And-Shoulders Formation

A technical analysis pattern used to predict reversals in financial markets, characterized by a peak (shoulder), followed by a higher peak (head), and another lower peak (shoulder).

Price Index

An indicator showing the average relative price changes for a specific basket of goods and services over time.

Moving Averages

A method used in technical analysis that smooths out price data by creating a constantly updated average price over a specific time period.

Trend Indicators

Technical analysis tools used to identify and follow the direction of market or asset price trends.