To Deter a Potential Entrant, an Existing Firm in a Market

Multiple Choice

To deter a potential entrant, an existing firm in a market may threaten to sharply increase production so that the entrant will be left with a small share of the market. This may be a credible threat if:

A) production exhibits economies of scale.
B) production exhibits diseconomies of scale.
C) production costs may fall due to learning-by-doing.
D) A and C are correct.
E) B and C are correct.