The threat of new entrants in an industry is high when
A) entry and exit costs are low.
B) entry costs are high.
C) distribution channels are few.
D) entry and exit costs are high.
E) few suppliers exist.

Question

Quizplus · Accepted Answer

When entry and exit costs are low, it becomes easier for new entrants to enter the industry, which increases competition and reduces profitability for existing firms. This increases the threat of new entrants in the industry. Therefore, a high threat of new entrants is present when entry and exit costs are low.

The Threat of New Entrants in an Industry Is High