Michael Porter developed the Five Forces Model to help firms do which of the following?

• A. Calculate consumer surplus in a market
• B. Analyze the competitive environment of an industry
• C. Set government regulations for markets
• D. Determine the optimal level of production

Answer: (B)

Verified step by step guidance

1. Understand that Michael Porter's Five Forces Model is a framework used in microeconomics and business strategy to analyze the competitive forces within an industry.
2. Recognize that the model identifies five key forces that affect the level of competition and profitability in an industry: the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and industry rivalry.
3. Note that the purpose of analyzing these forces is to help firms understand the competitive environment they operate in, which can inform strategic decisions to improve their market position.
4. Eliminate options that do not align with this purpose, such as calculating consumer surplus (which is a measure of consumer benefit), setting government regulations (which is typically done by policymakers), or determining the optimal level of production (which relates more to firm-level cost and output decisions).
5. Conclude that the correct use of the Five Forces Model is to analyze the competitive environment of an industry.