In an industry, the threat of entry is high when:

• A. barriers to entry are low
• B. government regulations are strict
• C. economies of scale are significant
• D. existing firms have strong brand loyalty

Answer: (A)

Verified step by step guidance

1. Understand the concept of 'threat of entry' in microeconomics, which refers to how likely it is for new firms to enter an industry and compete with existing firms.
2. Recognize that the threat of entry is high when it is easy for new firms to enter the market, meaning there are few obstacles or barriers preventing entry.
3. Identify common barriers to entry such as government regulations, economies of scale, and brand loyalty, which can make entry difficult and reduce the threat of entry.
4. Analyze each option: low barriers to entry mean it is easy for new firms to enter, increasing the threat; strict government regulations, significant economies of scale, and strong brand loyalty all act as barriers, reducing the threat.
5. Conclude that the threat of entry is high when barriers to entry are low, because new firms can enter the market more easily and compete with existing firms.