Question

Barriers to market entry do not include which of the following?

a.	Patents	b.	Sunk costs
c.	Copyrights	d.	Similarity is cost structure across firms

What comprises the oligopoly market?

a.	Companies selling services only	b.	Many small firms
c.	A few larger firms	d.	One firm

Regarding sunk costs, which of the following is not true?

a.	Sunk costs are not relevant to the firm’s decisions after it has entered the market.	b.	Sunk costs are an important factor in determining entry into a market because sunk costs cannot be recouped.
c.	Sunk costs, although likely to be important in guiding the decisions of firms, are unlikely to be influential on market structure.	d.	Sunk costs are an important factor in determining entry into a market because these costs may be quite high.

Of the following, which would be considered to be true if companies use game theory?

a.	All must follow the same rules.	b.	All players discuss all decisions.
c.	Business decisions are based upon what is believed to be your competitor’s decision.	d.	The winner gets to go first in the next game.

Answer 1

1) d.Similarity is cost structure across firms ( economies of scale or different cost structures pose a barrier to market entry )

2) c. A few larger firms ( Oligopoly market is a state of limited competition, in which a market consists of a small number of producers or sellers )

3) c. Sunk costs, although likely to be important in guiding the decisions of firms, are unlikely to be influential on market structure. ( If entry fails then sunk cost is lost so it influences market entry and thus creates a barrier , so a market with huge sunk cost will likely be an oligopoly market with fewer firms . So sunk cost does influence on market structure )

4) c. Business decisions are based upon what is believed to be your competitor’s decision. ( Decisions are made keeping in mind competitor's moves in any game )