All of the following are ways by which existing firms can deter the entry of new firms into an industry except A.threatening to raise prices. B.advertising products aggressively. C.continuously producing new and improved products. D.earning less than maximum profit.

The answer to above is (A) threating to raise prices. When a new firm enters the industry , it faces a lot of barriers. Most of them are from existing firms. In order to stop the entrance of new firms, the existing firms will - advertise their products - to gain customers. continuously produce new and improved products- this will help them to survive and compete. earn less than maximum profit sometimes- to sell more products , this will decrease the chances of other firms to sell more units and enjoy economies of scale. This is predatory pricing.So, in order to stop new firms entering industry , an existing firms will not raise its prices as it will lead them to losses in a competitive environment. Therefore option A is correct answer.

Answered: All of the following are ways by which…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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All of the following are ways by which existing firms can deter the entry of new firms into an industry except

threatening to raise prices.

advertising products aggressively.

continuously producing new and improved products.

earning less than maximum profit.

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