BIE Exam July 12 2023 Solutions

Page 1

12.7.2023 Solutions - BIE Exam Garrone Multiple-choice questions (10 points) Please tick the letter of the correct answer 1. Consumption of freshwater in South Europe agriculture is very high. This contributes to create water stress in a few regions. European agriculture ministries are subsidizing the adoption of precision irrigation equipment that allows farmer to save water by at least 30% (keeping production equal or higher). This type of equipment • Is an expansion supply-side response to water stress, because it will add new water resource to the available stock. • Is a water-efficient, demand-side management response to water stress, because it saves water without sacrificing agricultural production. • Is a substitute supply-side response to water stress, because farmers have to replace older irrigation equipment it will add new water resource to the available stock. • Is a water-efficient, demand-side management response to water stress, because it will cause a reduction of farmers’ water expenses for water 2. The incumbent knows that a few companies are considering whether or not to enter the market where it runs its business. Therefore it expands its production capacity in the country, adding assembly lines that have been designed specifically for its products. Thanks to this investment, it is making a commitment to stay in the market. In other words, • The investment rules out the unprofitable scenario of a price war with entrants • The investment is a signal of a tough reaction upon entry toward entrants • The investment makes the scenario of a price war with entrants credible • The investment makes the offer of additional volume for responding to additional demand credible Explain your choice in few words A strategy that makes a “price war with entrants…