Question

All other things being equal, which of the following would lead to lower barriers to entry in an industry?

A) The existence of economies of scale in the industry
B) Products are highly differentiated in the industry.
C) Industry incumbents have learning-curve cost advantages.
D) Raw materials are widely and readily available at a competitive price.

Answer 1

The option that would lead to lower barriers to entry in an industry is D) Raw materials are widely and readily available at a competitive price.

Step-by-step explanation:

Lower barriers to entry in an industry can be achieved when certain conditions exist. In this case, the option that would lead to lower barriers to entry in an industry is D) Raw materials are widely and readily available at a competitive price. This is because easily accessible raw materials at a competitive price would make it easier for new firms to enter the market and start producing. Choice A) suggests a higher barrier to entry, as large incumbents can produce at lower costs, making it difficult for new entrants to compete. Choice B) also indicates a higher barrier, as differentiating products may require significant investment. Choice C) implies that existing firms have cost advantages over time through increased efficiency, which can also deter new entrants. The correct answer here is D) Raw materials are widely and readily available at a competitive price. This scenario implies that new entrants won’t face restrictions or high costs in securing the inputs they need, thus reducing the barriers to entering the industry.