Over time, Paco's Pie Shop has developed a pie crust that cooks more rapidly than the crusts of other bakers and a filling that uses less costly inputs while maintaining comparable customer appeal. Other bakers have tried but failed to duplicate Paco's two cost advantages. Knowing that they will need to compete against Paco's Pie Shop, potential new entrants will:
A)cut corners on pie quality to reduce demand.
B)have less potential demand because of increased costs.
C)be discouraged from entering, owing to the advantages Paco's has achieved.
D)have free entry into but not free exit from the market.

Question

Quizplus · Accepted Answer

Potential new entrants will be discouraged from entering because they will not be able to replicate Paco's cost advantages, making it difficult for them to compete with Paco's Pie Shop. Therefore, they may choose not to enter the market.

Over Time, Paco's Pie Shop Has Developed a Pie Crust