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

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

Answer: (B)

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 influenced by barriers to entry, which are obstacles that make it difficult for new firms to enter the market.
3. Analyze each option in terms of barriers to entry: significant economies of scale usually increase barriers because new entrants must produce large quantities to compete on cost; strong brand loyalty creates customer preference for existing firms, raising barriers; strict government regulations impose legal and compliance costs, also raising barriers.
4. Identify that 'barriers to entry are low' means it is easier for new firms to enter the market, which directly increases the threat of entry.
5. Conclude that the threat of entry is high when barriers to entry are low, making it easier for new competitors to enter the industry.