CharmingBells Inc. has been running into a loss gradually, but the board of directors are reluctant to shut the company down because it has invested millions of dollars' worth of equipment which can only be used in that industry. Moreover, the people in CharmingBells Inc. have become emotionally attached to the company and do not want the company completely shut down. This scenario best illustrates ________.
A)high fixed costs
B)used production capacity
C)high exit barriers
D)unused production capacity

Question

Quizplus · Accepted Answer

The scenario best illustrates high exit barriers, as the company has invested heavily in equipment that can only be used in that industry and the employees have become emotionally attached to the company, making it difficult to shut down despite incurring losses. This creates obstacles to leaving the industry or closing the business, indicating high exit barriers.