Economies of scale will create a barrier to entry in an oligopoly when

Question

Quizplus · Accepted Answer

Economies of scale refer to the situation where the cost per unit of production decreases as output increases. In an oligopoly, if the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales, this means that the firm must produce a large output to take advantage of economies of scale. This creates a barrier to entry for new firms, as they would need to produce at a large scale from the outset to compete effectively with existing firms. Therefore, option B is the best choice.

Economies of Scale Will Create a Barrier to Entry in an Oligopoly