Paul and His Wife Are Investigating the Possibility of Starting

Multiple Choice

Paul and his wife are investigating the possibility of starting a new restaurant in Beaufort, a small town in the South Carolina low country. It has been Paul's lifelong dream. Paul has won a lottery and is trying to decide if this is what he wants to do with the prize money. He decides to do an analysis of the competitive environment. After his analysis, he discovers several important issues. First, it will cost most of Paul's lottery winnings to finance a restaurant in Beaufort. Second, it will be difficult to attract new customers because they have so many eating choices available to them in Beaufort and the surrounding towns. Finally, the competition in the restaurant industry is considered fierce by industry analysts and this is frightening to someone, like Paul, who has never worked in that industry.Based on Paul's analysis of the competitive environment, it can be inferred that

A) the customers will face switching costs.
B) there are no competitors.
C) there are many substitutes.
D) there are no barriers to entry.
E) the threat of new entrants is high.