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NEW QUESTION: 3
High exit barriers may restrain firms from leaving an industry even though returns are poor.
Which of the following is not an exit barrier?
A. Specialized assets.
B. Participation in a group executing an overall strategy.
C. Cost of labor settlements.
D. Avoidance of environmental safeguard requirements.
Answer: D
Explanation:
Net liquidation value is reduced when the fixed costs of exit are high, e.g., the cost of labor settlements, payments to professionals involved in the divestiture (CPAs, attorneys, etc.), cancellation of contracts (with distributors, suppliers, managers, etc.), and resettlement orretraining. Moreover, announcement of exit may have such effects as reduced employee productivity, loss of customers, and a decline in supplier reliability. However, some required investments, such as in environmental safeguards, may be avoided. Thus, avoiding the capital investment in environmental safeguards maybe a reason to exit an industry if the investment exceeds the expected profits. This is an example of a fixed cost that is not an exit barrier.

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Answer:
Explanation:


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