Which of the following governmental actions will increase the threat of new entrants in a market?
A)The Federal Reserve reduces the interest rates on credit for small businesses.
B)The Department of Commerce offers a patent to an existing player.
C)The Government squeezes money from the market through open-market operations.
D)The Federal Reserve increases the cash reserve ratio to tackle inflation.

Question

Quizplus · Accepted Answer

By reducing the interest rates on credit for small businesses, the government is making it easier for new entrants to obtain funding and compete in the market. This increases the threat of new entrants.

Answer: D
 By increasing the cash reserve ratio to tackle inflation, the Federal Reserve is making it more difficult for small businesses to obtain funding, which may decrease the threat of new entrants in the market.

Which of the Following Governmental Actions Will Increase the Threat