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In duopoly models discussed in class, one business could gain a "first mover" advantage over new potential entrants into the industry by _____
In duopoly models discussed in class, one business could gain a "first mover" advantage over new potential entrants into the industry by _____.
a. charging a low price
b. hiring a lot of workers before the new entrant could get them
c. building excess capacity so that it would be cheap to expand output, should the potential entrant decide to enter the market
d. adapting the latest technology
Expert Solution
- The correct answer is (d); Adapting the latest technology.
By adopting the latest technology, a business can be able to increase its output while decreasing the cost and time used in production. By reducing the cost of production, a company can be able to maximize its profits with an increase in outputs. This acts as a first-mover advantage over other businesses entering the market, as they all offer similar commodities or services, at similar prices, therefore the only way to beat the competition is to adopt new technology to maximize the increase in output levels to be able to capture the market.
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