Economies of scale can be a barrier to entry when
A)many investors are required in order to start a new firm.
B)potential entrants do not have the expertise to run a firm that does large-scale production.
C)potential entrants do not realize their costs would fall if they would just make a little investment.
D)it is realized that entry into the market will increase input prices.
E)it takes a very large capital investment to get average costs as low as those of firms already in the industry.

Question

Quizplus · Accepted Answer

Economies of scale refer to cost advantages that result from an increase in production. When firms already in the industry have achieved economies of scale, they can produce at a lower cost per unit than new entrants. This means that new entrants would have to make a very large capital investment in order to achieve the same level of efficiency as existing firms, making it difficult for them to compete on price. Therefore, economies of scale can be a barrier to entry for new firms.

Economies of Scale Can Be a Barrier to Entry When