AGEC 440 Final Questions and Answers
Graded A+
SOCIOCULTURAL TRENDS - Correct answer-a set of beliefs shared by one
social group ex: free speech in US, ex: constitution week at tamu, ex: letter from
young about alt right group
freedom of speech - Correct answer-first amendment rights come from virginia
declaration of independence - george mason basically reworded and wrote it in the
first amendment.
TECHNOLOGICAL TRENDS - Correct answer-for tech companies freedom of
speech is good bc it means more posts, more $
GOVERNMENT/REGULATORY TRENDS - Correct answer-if govt gets
involved in moral issues ex: climate change then according to friedman, thats using
force-you can't force someone to be a good person the essence of morality is not
forced
ECONOMIC TRENDS - Correct answer-there would be a loss of social welfare
because less creativity, innovation, etc. = less business
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,remote environment - Correct answer-ECONOMIC TRENDS,
GOVERNMENT/REGULATORY TRENDS, TECHNOLOGICAL TRENDS,
SOCIOCULTURAL
threat of entry - Correct answer-New entrants motivated to enter and compete due
to above normal economic profits earned by existing firms
- Increases industry competition
- Reduced performance of incumbent firms
• With free entrance, performance tends to competitive levels
Barriers to entry: cost of entry by new firms - Correct answer-- High cost detours
entry
- Determines sustainability of above normal
economic profits
- Protects incumbent firm's profits
8 ENTRY BARRIERS: - Correct answer-• economies of scale
• capital requirements
• access to distribution
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,• Product differentiation / brand identity
• natural cost advantages
• learning curve
• access to necessary inputs
• government policy
Threat of Entry: Barriers to
Entry: economies of scale - Correct answer-- High cost of fixed investment
- Fixed demand and high market share of incumbents
forces entrance at sub-optimal scale → Higher cost to
new entrant
Threat of Entry: Barriers to
Entry: product differentiation - Correct answer-- Incumbents have brand identity
and customer loyalty • New entrants face higher advertising costs to
change consumer behavior
• e.g. U.S. Brewing Industry (Budweiser)
Threat of Entry: Barriers to
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, Entry: natural cost advantage - Correct answer-Independent of scale economies
- Entrants face cost disadvantage relative to incumbent
• e.g. proprietary technology (patents), know how (firm's routines), favorable
access to inputs, favorable geographical locations, learning curve advantage
Threat of Entry: Barriers to
Entry: government policy - Correct answer-Government Policy
- Import Tariffs
- Supply management (Quota allocation schemes)
- Environmental regulation
- Licenses (e.g. fishing, forestry)
substitutes are - Correct answer-similar yet different
Factors Affecting Rivalry - Correct answer-• Large numbers of competing firms
- Approximates conditions of perfect competition
• Slow industry growth
- Leads to competition for market share • e.g. cola wars: Pepsi and Coke
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Graded A+
SOCIOCULTURAL TRENDS - Correct answer-a set of beliefs shared by one
social group ex: free speech in US, ex: constitution week at tamu, ex: letter from
young about alt right group
freedom of speech - Correct answer-first amendment rights come from virginia
declaration of independence - george mason basically reworded and wrote it in the
first amendment.
TECHNOLOGICAL TRENDS - Correct answer-for tech companies freedom of
speech is good bc it means more posts, more $
GOVERNMENT/REGULATORY TRENDS - Correct answer-if govt gets
involved in moral issues ex: climate change then according to friedman, thats using
force-you can't force someone to be a good person the essence of morality is not
forced
ECONOMIC TRENDS - Correct answer-there would be a loss of social welfare
because less creativity, innovation, etc. = less business
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,remote environment - Correct answer-ECONOMIC TRENDS,
GOVERNMENT/REGULATORY TRENDS, TECHNOLOGICAL TRENDS,
SOCIOCULTURAL
threat of entry - Correct answer-New entrants motivated to enter and compete due
to above normal economic profits earned by existing firms
- Increases industry competition
- Reduced performance of incumbent firms
• With free entrance, performance tends to competitive levels
Barriers to entry: cost of entry by new firms - Correct answer-- High cost detours
entry
- Determines sustainability of above normal
economic profits
- Protects incumbent firm's profits
8 ENTRY BARRIERS: - Correct answer-• economies of scale
• capital requirements
• access to distribution
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,• Product differentiation / brand identity
• natural cost advantages
• learning curve
• access to necessary inputs
• government policy
Threat of Entry: Barriers to
Entry: economies of scale - Correct answer-- High cost of fixed investment
- Fixed demand and high market share of incumbents
forces entrance at sub-optimal scale → Higher cost to
new entrant
Threat of Entry: Barriers to
Entry: product differentiation - Correct answer-- Incumbents have brand identity
and customer loyalty • New entrants face higher advertising costs to
change consumer behavior
• e.g. U.S. Brewing Industry (Budweiser)
Threat of Entry: Barriers to
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, Entry: natural cost advantage - Correct answer-Independent of scale economies
- Entrants face cost disadvantage relative to incumbent
• e.g. proprietary technology (patents), know how (firm's routines), favorable
access to inputs, favorable geographical locations, learning curve advantage
Threat of Entry: Barriers to
Entry: government policy - Correct answer-Government Policy
- Import Tariffs
- Supply management (Quota allocation schemes)
- Environmental regulation
- Licenses (e.g. fishing, forestry)
substitutes are - Correct answer-similar yet different
Factors Affecting Rivalry - Correct answer-• Large numbers of competing firms
- Approximates conditions of perfect competition
• Slow industry growth
- Leads to competition for market share • e.g. cola wars: Pepsi and Coke
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
