Market & Industry Analysis Flashcards

Which framework analyzes industry attractiveness using supplier power, buyer power, competitive rivalry, threat of substitutes, and threat of new entrants?

Answer: Porter's Five Forces

Porter's Five Forces is a structural framework used to evaluate industry attractiveness and competitive intensity.

In a perfectly competitive market, the long-run equilibrium price equals:

Answer: Average total cost at its minimum

In long-run perfectly competitive equilibrium, firms earn zero economic profit, so price equals minimum average total cost.

A market where two firms dominate and each must consider the other's pricing decisions is best described as:

Answer: Duopoly

A duopoly is a specific form of oligopoly where exactly two firms control the market and exhibit strategic interdependence.

The Herfindahl-Hirschman Index (HHI) is used primarily to measure:

Answer: Market concentration

HHI sums the squares of each firm's market share, providing a measure of market concentration used by antitrust regulators.

Which market structure allows firms to earn positive long-run economic profits due to product differentiation?

Answer: Pure monopoly

A pure monopoly can sustain long-run economic profits because barriers to entry prevent competitors from eliminating the profit.

An industry with high fixed costs relative to variable costs tends to exhibit:

Answer: Intense price competition during downturns

High fixed cost industries experience intense price competition during downturns as firms price down to marginal cost to cover variable costs and contribute to fixed overhead.

When analyzing industry life cycles, which stage is typically characterized by consolidation and shakeout of weaker competitors?

Answer: Maturity

During the maturity stage, growth slows, price competition intensifies, and weaker firms exit through mergers or bankruptcy, leading to market consolidation.