Which of the following is NOT a barrier to entry for a new firm into an industry?
Answer and explanation
Correct answer: C. The availability of many substitute products
- Step 1: Barriers to entry include capital requirements, economies of scale, brand loyalty, access to distribution and switching costs.
- Step 2: The availability of substitutes belongs to a different force, the threat of substitutes, rather than the barriers to entry.
Answer
The availability of many substitute products.
Why not the others: High set-up costs are a classic barrier to entry. Scale economies let existing firms charge lower prices, deterring new entrants. High switching costs make it difficult for new entrants to attract customers.
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