If economies of scale are an industry's primary entry barrier, a new entrant's major concern is:
A) its inability to counter brand loyalty that customers have for established companies in the industry.
B) the 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

Economies of scale allow established producers to produce at lower costs as they increase production. A new entrant may struggle to produce in large enough volumes to achieve the same cost efficiencies, which may make it difficult to compete on price and therefore gain market share.

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