More Study Questions for Midterms

More Study Questions for Midterms - 1 A firm has much lower...

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1) A firm has much lower costs than its rivals; it currently prices much below its rivals. Should it raise its price? 2) An entrant is considering an industry with high profits and high BTE. Should this entrant enter or stay out? 3) A firm is considering whether or not to raise switching costs out of its product; it will also cost to switch in to using this product. Should it go ahead and establish these switching costs? 4) “Investors should be wary of investing in industries with high fixed costs”. Evaluate. 5) Compare the fixed costs in the concentrate and bottling industries. Would you say barriers to entry are higher in bottling or in concentrate? How does this affect the competitive forces and the profitability of the two industries? 6) Roger Enrico, he former president of Pepsi, says that the competition between Coke and Pepsi must be a “battle without blood.” What does he mean by this statement? How do the firms try to achieve this? How successful have they been? In terms of the competitive forces, what other competitive force is key in allowing
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Unformatted text preview: Coke and Pepsi to pursue a battle without blood? 7) Compare the aluminum smelting and concentration producing industries: Where is rivalry among the existing firms higher? What are the key factors explaining this difference? What is the main strategy pursued by firms in each industry? How does this affect profitability of each industry? 8) What would you say are the key barriers to imitation helping Coke and Pepsi to sustain their high profits? 9) Consider the following statement: A firm producing a lower-quality product may actually benefit when a rival(s) increases the quality of its product. Using the concentrate industry as an example, explain how this might occur. 10) Evaluate the following statement: “Firms pursuing differentiation strategies should always try to move as far away from rivals as possible, i.e firms should always try to maximize their differentiation.”...
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  • Spring '07
  • Barriers to entry, Competitive Forces, high profits

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