If economies of scale are an industry's primary entry barrier, a new entrant's major concern is:
A)its inability to counter brand loyalty that customers have for established companies in the industry.
B)the inferior quality of its products.
C)its inability to match the innovation of the established finn.
D)its inability to produce in sufficient volume to match the cost advantages of established producers.
E)its inability to get buyers to switch to its product.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that established producers have due to producing in large volumes. This makes it difficult for a new entrant to match their costs and profitability without also producing at a similar volume. Therefore, the new entrant's major concern is its inability to produce in sufficient volume to match the cost advantages of established producers. As a result, D is the best answer.

If Economies of Scale Are an Industry's Primary Entry Barrier