Answered: inated by Apple, but recently the Droid…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The smartphone market has been dominated by Apple, but recently the Droid has been able to leverage Google's information services into market gains, while Blackberry, known for its secure business-oriented network, has attempted to become more attractive with a “friendlier” interface. At the same time, a number of less capable fringe firms are emerging.

Suppose an economist analyzes this industry as follows:

ECONOMIST: The market had been a near Apple monopoly. Profits of this monopoly attracted entry by Droid- and Blackberry-based phones, increasing rivalry between firms in the industry. The emergence of smaller fringe firms suggests that entry barriers have fallen substantially, so competition has or will soon become fiercer.

True or False: This analysis is consistent with the industrial organization (IO) view.

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