Industries where a decline in demand is most likely to cause industry-wide losses tend to have the following characteristics:
A)High concentration,lack of product differentiation and scale economies
B)High exit barriers,lack of product differentiation,and a high ratio of fixed to variable costs
C)High exit barriers,lack of product differentiation,and powerful buyers
D)Powerful buyers and suppliers and high exit barriers

Question

Quizplus · Accepted Answer

Industries with high exit barriers, lack of product differentiation, and a high ratio of fixed to variable costs are more likely to experience industry-wide losses when there is a decline in demand. High exit barriers, such as high sunk costs or long-term contracts, make it difficult for firms to exit the market, leading to excess capacity and a weaker competitive environment. Lack of product differentiation means that firms may have to resort to price competition to maintain market share, reducing profitability. High fixed costs mean that a decline in demand can lead to an inability to cover these costs, resulting in losses for the industry.

Industries Where a Decline in Demand Is Most Likely to Cause