If consumers are loyal to the products of an existing firm,this loyalty may
A)reduce the incentives for the firm to invest
B)result in more responsive management and better quality products
C)reduce the demand for imported goods
D)serve as a barrier to new entry into the market
E)force the firm to produce at higher costs

Question

Quizplus · Accepted Answer

Consumer loyalty to existing products creates a barrier to entry for new firms because they will have to compete against already established brands that have loyal customers. This can make it difficult for new firms to gain market share and can reduce the threat of competition, which can make the existing firm complacent and reduce the incentives for investment. However, if managed properly, the existing firm may also respond to the consumer loyalty by improving the quality of their products and being more responsive to consumer needs. There is no direct relationship between consumer loyalty and imported goods or higher production costs.

If Consumers Are Loyal to the Products of an Existing