In the long-run, firms in a monopolistically competitive industry will a. earn s
ID: 1160059 • Letter: I
Question
In the long-run, firms in a monopolistically competitive industry will
a.
earn substantial economic profits
b.
tend to just cover costs, including normal profits
c.
seek to increase the scale of operations
d.
seek to reduce the scale of operations
The essence of competitive strategy includes which of these?
a.
management-based capabilities
b.
resource=based capabilities
c.
business processes
d.
adaptive innovation
e.
a, b & c
f.
b, c & d
To remain competitive today, many companies commit themselves to:
a.
continuous improvement processes
b.
competitive strategic analysis by outside experts
c.
episodes of strategic planning
d.
a and c
e.
b and c
Explanation / Answer
1. In the long run, the monopolistically competitive industry will earn zero economic profit because all the economic profits or losses will be evaded by simultaneous entry and exit of the firms in the long run. That is why, in the long run, the monopolistically competitive industry will only plan to recover the costs, which also includes normal profits. Thus,
Option a. earn substantial economic profits, is incorrect.
Option c. seek to increase the scale of operations, is incorrect.
Option d. seek to reduce the scale of operations, is incorrect.
hence, Option b. tend to just cover costs, including normal profits, is correct.
2. The competitive markets are dynamic and ever-changing on a day-to-day basis. It is essential for a firm's competitive strategy to cope with these changes effectively. That is why, a competitive strategy should be such that it includes a combination of: resource-based capabilities, business processes and most importantly, adaptive innovation to cope with the ongoing chnages. Thus,
Option a. ?management-based capabilities, is incorrect.
Option b. resource-based capabilities, is incorrect as only resource-based capabilities is insufficient.
Option c. ?business processes, is incorrect as only ?business processes is not sufficient.
Option d. ?adaptive innovation, is incorrect as only ?adaptive innovation will not suffice.
Option e. a, b & c are incorrect as it does not include ability to face dynamism.
Hence, Option f. ?b, c & d is correct as it includes all three important elements of competitive strategy.
3. In order to remian competitive today, many companies commit themselves to continuous improvement processes and the ?episodes of strategic planning. The ?episodes of strategic planning means a defined path or strategy by a firm and the utilization of the resources in the direction of this startegy. Also, continuous improvements should be seen with respect to this strategy. Thus,
Option a. ?continuous improvement processes is incorrect as only ?continuous improvement processes is insufficient.
Option b. ?competitive strategic analysis by outside experts, is incorrect.
Option c. ?episodes of strategic planning is incorrect as only ?episodes of strategic planning is insufficient.
Option e. Both options b and c, is incorrect.
Hence, Option d. Both options a and c is correct.
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