The threat of new entrants is high when there are:

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

Answer: (B)

Verified step by step guidance

1. Understand the concept of 'threat of new entrants' in microeconomics, which refers to how easily new competitors can enter an industry and compete with existing firms.
2. Identify factors that affect the threat of new entrants, such as barriers to entry, economies of scale, brand loyalty, and government regulations.
3. Recognize that significant economies of scale act as a barrier to entry because new firms must produce large quantities to compete on cost, making entry more difficult.
4. Understand that strong brand loyalty among existing firms makes it harder for new entrants to attract customers, thus lowering the threat of new entrants.
5. Conclude that low barriers to entry (such as minimal startup costs, few regulations, and easy access to resources) increase the threat of new entrants, making it the correct answer.