Question

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

• A. High capital costs
• B. High switching costs
  
• C. Entry barriers - Tariffs
• D. None of these

Answer 1

Answer: (A)

High capital costs

Generally, a business with sufficient financial resources choose to enter the international markets where costs of capital of such investment is likely to be high. It can be hence said that high capital costs are not always a threat for the competitors to enter a market as people may be ready to bear the costs if they expect huge amount of profits in the future.