If economies of scale are an industry's primary entry barrier, a new entrant's major risk is
A) its inability to access labor and materials.
B) inferior quality of its products.
C) its inability to match the innovation of the established firm.
D) its inability to produce in sufficient volume to match the cost advantages of established producers.
E) its inability to get buyers to switch to its product.

Question

Quizplus · Accepted Answer

The primary entry barrier in this scenario are economies of scale, meaning that established producers have cost advantages due to their large-scale production. Therefore, a new entrant's major risk would be the inability to produce in sufficient volume to match these cost advantages, making it difficult to compete on price or profitability.

If Economies of Scale Are an Industry's Primary Entry Barrier