Question

Which of the following is not effective in preventing a potential competition from entering the market?

• A. High capital costs
• B. Differentiation
• C. Retaliation
• D. Low switching costs are buyers

Answer 1

Answer: (A)

High capital costs

Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings, construction, and equipment used in the production of goods or in the rendering of services. In other words, it is the total cost needed to bring a project to a commercially operable status. Capital cost is not an effective factor which influences the decision to enter a potential market.