Final answer:
Actions of firms that are aimed at deterring entry include increasing advertising and marketing efforts, lowering prices to undercut potential competitors, entering into exclusive contracts with suppliers, and engaging in predatory pricing.
Step-by-step explanation:
Actions of firms that are aimed at deterring entry include:
- Increasing advertising and marketing efforts: By increasing their advertising and marketing efforts, firms can create a strong brand image and increase brand loyalty among consumers. This can make it difficult for new entrants to attract customers and gain market share.
- Lowering prices to undercut potential competitors: Firms can lower their prices to such an extent that it becomes financially unviable for potential competitors to enter the market and compete with them.
- Entering into exclusive contracts with suppliers: By entering into exclusive contracts with suppliers, firms can limit the availability of key inputs to potential competitors, making it difficult for them to operate.
- Engaging in predatory pricing: Predatory pricing involves a firm temporarily lowering its prices to drive competitors out of the market. This strategy aims to discourage new entrants from entering the market due to the risk of facing intense price competition.