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Free CMA Exam Braindumps (page: 7)

Page 6 of 336
PDF with 1336 Questions
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The prospect for the long-term profitability of an existing firm is greater when

  1. The firm operates in an industry with a steep learning curve in its production process
  2. The costs of switching suppliers is low
  3. New entrants are encouraged by government policy
  4. Distribution channels are willing to accept new products

Answer(s): A

Explanation:

The prospects of long-term profitability are contingent upon the industry's exit and entry barriers. The entry of new firms in market decreases the prospect for long-term profitability. When a firm operates in an industry that has a steep learning curve, it ios more difficult for new firms to enter the market. Thus, the prospects of long-term profitability are greater for an existing firm.



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Structural considerations affecting the threat of substitutes include all of the following except

  1. Relative prices
  2. Brand identity
  3. Cost of switching to substitutes
  4. Customers' inclination to use a substitute

Answer(s): B

Explanation:

Substitutes are types of goods and services that serve the same purpose. All products that can replace a good or service should be considered substitutes. For example, bicycles and cars are substitutes for public transportation. Structural considerations determine the effect substitutes have on one another. However, because substitutes affecting the threat of substitutes.



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Logistics Corp. is performing research to determine the feasibility of entering the truck rental industry. The decision to enter the market is most likely to be deterred if

  1. Buyer switching costs are high
  2. Buyers view the product as differentiated
  3. The market is dominated by a small consortium of buyers
  4. Buyers enjoy large profit margins

Answer(s): C

Explanation:

When purchasing power is concentrated in a few buyers or when buyers are well organized, their bargaining power is greater. This effect is reinforced when sellers are in capital-intensive industry such as trucking.



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Which industry factor does not contribute to competitive rivalry?

  1. Price-cutting, large advertising budgets, and frequent introduction of new products.
  2. A form's growth must come from winning, other firms' customers.
  3. High costs of switching suppliers.
  4. High fixed costs.

Answer(s): C

Explanation:

If it is expensive to switch suppliers, customers will be less motivated to respond competitor advances.






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