All Courses > Stocks > 200
Stocks 205: Economic Moats

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
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?
Choose wisely. There is only one correct answer.
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.
An example of the network effect is when _______.
Choose wisely. There is only one correct answer.
A company starts making parts for another company. This kind of complementarity increases the value of the latter company.
3.
What is an economic moat?
Choose wisely. There is only one correct answer.
A long-term competitive advantage that allows a company to earn oversized profits over time. As a moat, it is 'insulated' against the competition.
4.
Having an efficient scale also means having a wide moat.
Choose wisely. There is only one correct answer.
False. Although there are some efficient-scales with wide moats, the majority of them have narrow moats.
5.
Why would a company raise its switching costs?
Choose wisely. There is only one correct answer.
To lock its customers in. The more customers are locked in, the more likely a company can raise prices and still keep them.
6.
When a company tries to differentiate its product from those of its competition by spending money on marketing, it is attempting to create what type of moat?
Choose wisely. There is only one correct answer.
Intangible assets. Marketing is generally done to build brands, and brands are intangible assets.