Which of the following is TRUE about the threat of new entrants?
A)New entrants often increase capacity within the industry.
B)The easier to enter an industry,the higher the profit margins and growth potential.
C)If competitors are strong,existing competitors will not react strongly to any new entrants.
D)If there are huge barriers to entry,competitors will be attracted to the industry.

Question

Quizplus · Accepted Answer

New entrants often invest heavily in building new capacity within the industry, which can lead to excess capacity, price wars and reduced profitability for existing competitors.

Answer: B
 The easier it is to enter an industry, the more likely new competitors will enter and drive down profit margins and growth potential. Higher barriers to entry, on the other hand, tend to create more stable and profitable markets.

Answer: D
 High barriers to entry can deter new competitors, but can also attract existing competitors looking for new opportunities in established markets. Strong competitors in particular may see the high barriers as an opportunity to expand their market power.

Which of the Following Is TRUE About the Threat of New