Fixed costs of entry create an advantage for potential entrants since incumbents have already made these expenditures while potential entrants can avoid these costs
Indicate whether the statement is true or false
False. The advantage is to the incumbent. The incumbent ignores the fixed entry cost since it is a sunk cost. For the potential entrant, the fixed entry cost can be avoided if entry does not occur. Thus, the fixed entry cost is an added expense to entrants.
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The maximin criterion is attributed to which political philosophy?
a. utilitarianism b. liberalism c. libertarianism d. repubicanism
Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the:
A. laws of economics have been violated. B. new product must have increasing, not diminishing, marginal utility. C. existing products were being produced at a loss. D. new product has a lower price than the existing substitute products.
If the social costs of refining oil are greater than the private costs of oil refining, then
A) the external costs of oil refining are greater than the social costs of oil refining. B) users of products that use refined oil are paying too much for the products. C) there is too much oil refining. D) the amount of oil refining needs to increase in order to bring social costs and private costs in line with each other.
Keynesians are skeptical of the classical theory that recessions are periods of increased mismatch between workers and jobs because
A. people are indifferent between being employed or not. B. help-wanted advertising falls during recessions. C. workers spend a lot of time searching for work in recessions. D. help-wanted advertising rises during recessions.