Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
Why are economic moats advantageous?
They allow a company to generate profits and keep competitors at bay. Companies that reward investors over the long haul are those that have a durable competitive advantage.
2.
Why might a restaurant company be unlikely to ever have anything more than a narrow moat?
Because consumer switching costs are so low. Many restaurants are quite profitable, and not all of them spend money on branding. Still, there is a lot of competition in the industry, and it's very easy to walk across the street to a rival restaurant, so the switching costs are very low.
3.
What is an economic moat?
A long-term competitive advantage that allows a company to earn oversized profits over time. A moat protects the business and does not let other businesses in.
4.
Which of these is not a type of economic moat?
Technological expertise. Technological expertise can form the foundation for an economic moat, but it is rare that the expertise provides a sustainable, long-term competitive advantage, because improvements in technology are often easily imitated.
5.
Determining the goal of a business is normally easy.
False. Sometimes it is not easy, because a business might combine different objectives.
