Choose wisely. There is only one correct answer to each question.
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1.
Which type of moat benefits from making life difficult for its customers?
Switching costs. High switching costs compel customers to stick with a company, because there is a cost to the customers to choose another alternative. Economies of scale make life better for customers because they allow firms to price their products lower.
2.
Making it prohibitively expensive for customers to leave your company for your competitors is a way to build a sustainable competitive advantage in your industry.
True. By creating high switching costs, you can keep your advantage.
3.
How can a low-cost producer achieve a barrier to entry?
All of the above. These are all ways that a low-cost producer can achieve barriers to entry.
4.
Which of the following is unlikely to be an attribute of companies with efficient scales?
They are in a rapidly growing market. Being in a rapidly growing market normally means that there is a lot of room for new competitors to come in, and that is not a part of the efficient-scale universe.
5.
When a manufacturer starts making parts for another manufacturer, that is an example of the network effect.
True. The first manufacturer would be complementing an existing product and thus raising its value.
6.
Harley-Davidson has what type of economic moat?
Intangible assets. Harley's brand is an intangible asset that is a sustainable competitive advantage.
