Which of the following statements regarding the impact of product differentiation on the threat of new entry is accurate?
A) Product differentiation helps reduce the threat of new entry by forcing potential new entrants to absorb costs associated with overcoming incumbent firms' product-differentiation advantages.
B) Product differentiation increases the threat of new entry by allowing potential new entrants to avoid costs associated with overcoming incumbent firms' product-differentiation advantages.
C) Product differentiation has no impact on the threat of new entry.
D) It is not possible to determine the impact of product differentiation on the threat of new entry.

Question

Quizplus · Accepted Answer

Product differentiation creates a barrier to entry for potential new entrants as they will have to invest more resources to create a product that is different from the incumbent firms. This requires additional costs associated with market research, product development, and advertising. Therefore, it helps reduce the threat of new entry by forcing new entrants to absorb costs associated with overcoming the incumbents' product differentiation advantages.

Which of the Following Statements Regarding the Impact of Product