In a competitive market, an overall cost leadership strategy requires new entrants to:

• A. achieve lower production costs than existing firms
• B. focus exclusively on product differentiation
• C. set prices above the market equilibrium
• D. ignore economies of scale

Answer: (A)

Verified step by step guidance

1. Understand the concept of an overall cost leadership strategy: it involves a firm aiming to become the lowest-cost producer in the industry to gain a competitive advantage.
2. Recognize that in a competitive market, new entrants must be able to produce at lower costs than existing firms to compete effectively on price.
3. Recall that product differentiation is a different strategy focused on making a product unique rather than minimizing costs.
4. Note that setting prices above the market equilibrium is not sustainable in a competitive market because buyers will choose cheaper alternatives.
5. Understand that ignoring economies of scale is detrimental because economies of scale help reduce average costs as production increases, which is crucial for cost leadership.