In discussions of barriers to entry, what is meant by the term "virtuous cycle"?
A)A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products.
B)A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market.
C)A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the "invisible hand").
D)A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers.

Question

Quizplus · Accepted Answer

A virtuous cycle, in the context of barriers to entry, refers to the process where a firm with a new product in the market can attract more customers as its product's value increases through the use of other customers. This, in turn, strengthens the company's position and creates a barrier to entry for potential competitors. Therefore, the correct option is D.

In Discussions of Barriers to Entry, What Is Meant by the Term