Shelly Brunner owns a sports-themed restaurant which is located in an upscale business district in Chicago. One advantage that Shelly has is that she bought the lot she built her restaurant on 25 years ago when lots in the area were selling for $50,000. Shelly knows that several potential competitors have looked at bare lots near her business but haven't been willing to pay the asking prices, which are as high as $500,000. Which of the six major sources of barriers to entry is causing a disincentive for new firms to enter Shelly's industry?

Question

Quizplus · Accepted Answer

The high cost of real estate in the upscale business district, which has increased tenfold since Shelly bought her lot, represents a cost advantage that Shelly has independent of the size of her business. This makes it more expensive for new competitors to enter the market.

Shelly Brunner Owns a Sports-Themed Restaurant Which Is Located in an Upscale