Competitive pressures stemming from the threat of entry are stronger when:

• A. existing firms have significant cost advantages over potential entrants
• B. the market is dominated by a single monopoly with no close substitutes
• C. barriers to entry are low and new firms can easily enter the market
• D. government regulations strictly limit the number of firms in the market

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of 'threat of entry' in microeconomics, which refers to how easily new firms can enter a market and compete with existing firms.
2. Step 2: Recognize that competitive pressures increase when barriers to entry are low, meaning new firms can enter the market without significant obstacles.
3. Step 3: Analyze the options given: if existing firms have significant cost advantages, entry is harder, so competitive pressure is weaker; if a monopoly dominates with no close substitutes, entry is also difficult; government regulations limiting firms create high barriers.
4. Step 4: Conclude that the scenario where barriers to entry are low and new firms can easily enter the market leads to stronger competitive pressures from the threat of entry.
5. Step 5: Summarize that the key factor increasing competitive pressure from potential entrants is the ease of market entry, which depends on low barriers such as minimal startup costs, few regulations, and accessible resources.