QUESTIONS 79 THROUGH 90 RELATE TO EQUITY INVESTMENTS

89. An equity analyst follows two industries with the following characteristics. Industry 1:A few companies with proprietary technologies; products with unique features; high switching costs; and minimal regulatory influences. Industry 2: A few companies producing relatively similar products; sales varying with disposable income and employment levels; high capital costs and investment in physical plants; rapid shifts in market shares of competing firms; and minimal regulatory influences.Based on the above information, the analyst will most appropriately conclude that compared to the firms in Industry 2, those in Industry 1 would potentially have: A. larger economic profits. B. over-capacity problems. C. high bargaining power of customers.