An incumbent in an industry possesses extensive economies of scale. For an entrant to enter the industry, which of the following is a possibility? I. The entrant will potentially enter on a small scale with a relatively small effect on price but with high average costs, resulting in negative post-entry profits. II. The entrant will potentially enter on a cost-competitive basis, with significant market share and lowering prices, but making positive post-entry profits.

MCQs on major topics and theories in the field of Industrial Organization. Topics include: Market structure analysis and the strategic behaviors of competing firms, including (but not limited to) product differentiation, collusion, price discrimination, pricing strategy, non-price discrimination (i.e. advertising), horizontal mergers, vertical integration, and vertical restraints.