First-mover advantages are unlikely to be present in which one of the following instances?

• A. When a firm benefits from economies of scale that competitors cannot match
• B. When government grants a patent to a single producer
• C. When a firm has exclusive control over a key resource
• D. When entry barriers are low and new firms can easily enter the market

Answer: (D)

Verified step by step guidance

1. Understand the concept of first-mover advantage: it refers to the benefits a firm gains by entering a market before its competitors, such as establishing brand loyalty, securing scarce resources, or achieving economies of scale.
2. Analyze each option to identify whether it creates a barrier to entry or a competitive advantage that protects the first mover:
3. 1. Economies of scale: If a firm benefits from economies of scale that competitors cannot match, it creates a cost advantage that is difficult for new entrants to overcome, supporting first-mover advantage.
4. 2. Government patent: A patent legally prevents other firms from producing the same product, granting exclusive rights to the first mover, which is a strong first-mover advantage.
5. 3. Exclusive control over a key resource: Controlling a critical input restricts competitors' access, creating a barrier to entry and supporting first-mover advantage.
6. 4. Low entry barriers: If new firms can easily enter the market, the first mover cannot maintain a lasting advantage because competitors can quickly replicate or compete, making first-mover advantages unlikely.