1
AGEC 440 Final Questions with Answers (100% Correct
Answers)
SOCIOCULTURAL TRENDS Answer: a set of beliefs shared by one
social group ex: free speech in US, ex: constitution week at tamu, ex:
letter from young about alt right group
freedom of speech Answer: first amendment rights come from virginia
declaration of independence - george mason basically reworded and
wrote it in the first amendment.
TECHNOLOGICAL TRENDS Answer: for tech companies freedom of
speech is good bc it means more posts, more $
GOVERNMENT/REGULATORY TRENDS Answer: if govt gets
involved in moral issues ex: climate change then according to
friedman, thats using force-you can't force someone to be a good
person the essence of morality is not forced
ECONOMIC TRENDS Answer: there would be a loss of social welfare
because less creativity, innovation, etc. = less business
© 2025 All rights reserved
,2
remote environment Answer: ECONOMIC TRENDS,
GOVERNMENT/REGULATORY TRENDS, TECHNOLOGICAL
TRENDS, SOCIOCULTURAL
threat of entry Answer: New entrants motivated to enter and compete
due to above normal economic profits earned by existing firms
- Increases industry competition
- Reduced performance of incumbent firms
• With free entrance, performance tends to competitive levels
Barriers to entry: cost of entry by new firms Answer: - High cost
detours entry
- Determines sustainability of above normal
economic profits
- Protects incumbent firm's profits
8 ENTRY BARRIERS: Answer: • economies of scale
• capital requirements
© 2025 All rights reserved
,3
• access to distribution
• Product differentiation / brand identity
• natural cost advantages
• learning curve
• access to necessary inputs
• government policy
Threat of Entry: Barriers to
Entry: economies of scale Answer: - High cost of fixed investment
- Fixed demand and high market share of incumbents
forces entrance at sub-optimal scale → Higher cost to
new entrant
Threat of Entry: Barriers to
Entry: product differentiation Answer: - Incumbents have brand
identity and customer loyalty • New entrants face higher advertising
costs to
© 2025 All rights reserved
, 4
change consumer behavior
• e.g. U.S. Brewing Industry (Budweiser)
Threat of Entry: Barriers to
Entry: natural cost advantage Answer: Independent of scale economies
- Entrants face cost disadvantage relative to incumbent
• e.g. proprietary technology (patents), know how (firm's routines),
favorable access to inputs, favorable geographical locations, learning
curve advantage
Threat of Entry: Barriers to
Entry: government policy Answer: Government Policy
- Import Tariffs
- Supply management (Quota allocation schemes)
- Environmental regulation
- Licenses (e.g. fishing, forestry)
substitutes are Answer: similar yet different
© 2025 All rights reserved
AGEC 440 Final Questions with Answers (100% Correct
Answers)
SOCIOCULTURAL TRENDS Answer: a set of beliefs shared by one
social group ex: free speech in US, ex: constitution week at tamu, ex:
letter from young about alt right group
freedom of speech Answer: first amendment rights come from virginia
declaration of independence - george mason basically reworded and
wrote it in the first amendment.
TECHNOLOGICAL TRENDS Answer: for tech companies freedom of
speech is good bc it means more posts, more $
GOVERNMENT/REGULATORY TRENDS Answer: if govt gets
involved in moral issues ex: climate change then according to
friedman, thats using force-you can't force someone to be a good
person the essence of morality is not forced
ECONOMIC TRENDS Answer: there would be a loss of social welfare
because less creativity, innovation, etc. = less business
© 2025 All rights reserved
,2
remote environment Answer: ECONOMIC TRENDS,
GOVERNMENT/REGULATORY TRENDS, TECHNOLOGICAL
TRENDS, SOCIOCULTURAL
threat of entry Answer: New entrants motivated to enter and compete
due to above normal economic profits earned by existing firms
- Increases industry competition
- Reduced performance of incumbent firms
• With free entrance, performance tends to competitive levels
Barriers to entry: cost of entry by new firms Answer: - High cost
detours entry
- Determines sustainability of above normal
economic profits
- Protects incumbent firm's profits
8 ENTRY BARRIERS: Answer: • economies of scale
• capital requirements
© 2025 All rights reserved
,3
• access to distribution
• Product differentiation / brand identity
• natural cost advantages
• learning curve
• access to necessary inputs
• government policy
Threat of Entry: Barriers to
Entry: economies of scale Answer: - High cost of fixed investment
- Fixed demand and high market share of incumbents
forces entrance at sub-optimal scale → Higher cost to
new entrant
Threat of Entry: Barriers to
Entry: product differentiation Answer: - Incumbents have brand
identity and customer loyalty • New entrants face higher advertising
costs to
© 2025 All rights reserved
, 4
change consumer behavior
• e.g. U.S. Brewing Industry (Budweiser)
Threat of Entry: Barriers to
Entry: natural cost advantage Answer: Independent of scale economies
- Entrants face cost disadvantage relative to incumbent
• e.g. proprietary technology (patents), know how (firm's routines),
favorable access to inputs, favorable geographical locations, learning
curve advantage
Threat of Entry: Barriers to
Entry: government policy Answer: Government Policy
- Import Tariffs
- Supply management (Quota allocation schemes)
- Environmental regulation
- Licenses (e.g. fishing, forestry)
substitutes are Answer: similar yet different
© 2025 All rights reserved
