PART A

Which of the following is not a valid statement?

Multiple Choice

• Companies that consistently earn rates of return above the floor are said to have a competitive advantage.

• Competition in an industry continually works to drive down the rate of return on assets toward the competitive floor.

• Rates of return that are higher than the industry floor stimulate more competition as existing companies innovate and expand their market reach or as new companies enter the industry.

• Competitive ceiling is the rate of return that would be earned in the economists "perfectly competitive" industry.

PART B

Strategies to gain a competitive advantage include product differentiation and

Multiple Choice

• improving product quality and reliability.

• low-cost leadership.

• building brand loyalty.

• developing superior products.