Industries characterized by high economies of scale typically attract fewer new entrants.

Question

Quizplus · Accepted Answer

Economies of scale refers to spreading the costs of production over the number of units produced. The cost of a product per unit declines as the absolute volume per period increases. This deters entry by forcing the entrant to come in at a large scale and risk strong reaction from existing firms or come in at a small scale and accept a cost disadvantage. Both are undesirable options.

Industries Characterized by High Economies of Scale Typically Attract Fewer