Choose wisely. There is only one correct answer to each question.
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1.
If a company is able to price its products lower than its competition and still make a profit while its competition is in the red, it has what type of moat?
Low-cost producer. Being a low-cost producer allows companies to price their products at lower levels than the competition, attracting buyers. Likewise, companies with low costs can price their products at the same level as competitors and make a higher profit.
2.
Why would a company raise its switching costs?
To lock its customers in. The more customers are locked in, the more likely a company can raise prices and still keep them.
3.
Having an efficient scale also means having a wide moat.
False. Although there are some efficient-scales with wide moats, the majority of them have narrow moats.
4.
A company can achieve the 'network effect' simply by more people using its product or service.
True. As more people use it, its value to the marketplace grows.
5.
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.
6.
Which of the following would not be an intangible asset?
The headquarters building. A headquarters building is tangible, not intangible.
