Question

Which of the following is the best example of a substitute:

Group of answer choices

Apple iPhone vs. Samsung Galaxy

Porsche vs. Ferrari

Coke vs. Pepsi

Amtrak vs. Southwest Airlines

DirecTV spent millions of dollars to establish their satellite network. This was a significant investment that will take time for them to get a return but it also protects them from competition because of this barrier to entry:

Group of answer choices

Incumbency advantage

Capital requirements

Supply-side economies of scale

Customer switching costs

Widemedia felt they could leverage their existing capability for delivering online media to help them expand their business. It knew how to protect digital rights for video content and felt it would be easy to leverage that knowledge to protect digital rights for music content. They decided leverage that strength to enter the subscription music business. Which barrier to entry does this best illustrate?

Group of answer choices

Incumbency advantage

Capital requirements

Supply-side economies of scale

Demand-side economies of scale

Answer 1

1. Option C Coke vs Pepsi

Substitute goods or substitutes are at least two products that could be used for the same purpose by the same consumers.Substitute goods are identical, similar, or comparable to another product, in the eyes of the consumer. If due to some reason coke is not available the person will consume pepsi.

2.Option B Capital Requirements

The necessary infrastructure to support cable and wireless services requires extremely high capital expenditure investments, at a level that would be very difficult for any new company to raise. Research and development spending is also necessary.

3.Option A Incumbency Advantage.

A barrier to entry only exists if an incumbent (because of its incumbency) has a competitive advantage over the most-likely potential entrant.Barriers to entry are the economic term describing the existence of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business. Barriers to entry benefit existing firms because they protect their revenues and profits.