Supplier Bargaining Power Impact

Summary

Suppliers can impact firm profitability by reducing production and raising prices, thereby decreasing profits. Excess capacity within an industry can deter new entrants by allowing existing firms to increase production without significant costs, making the market less attractive.

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Which of the following is a deterrent to entry into an industry A. Minimum effective scale is relatively unimportant B. Income benefit firms are not aggressive C. The absence of learning curves in the industry D. Excess capacity within the industry
The correct answer to the question "Which of the following is a deterrent to entry into an industry?" is:
D. Excess capacity within the industry
**Excess capacity** can deter new entrants because it implies that existing firms can increase production without incurring significant additional costs, potentially driving prices down and making the market less attractive for new entrants.
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