Question

If other beer companies are able to enter the market and basically replicate the production process and cost structure of Watts' Brewery, what will ultimately expect to happen to the price of beer (paid by consumers) and the cost of beer (paid by producers)?

Group of answer choices:

A)price rises; cost rises

B)price rises; cost falls

C)price falls; cost rises

D)price falls; cost falls

Answer 1

In the given question the situation of barrier to entry is given

It is clearly shown that there is very less barriers to entry due to which many new beer company enter into the market and this will definitely increase the competition among the producers

When competition increases then production cost will also rise for the producers.

But the consumers have more choices to buy from various producers

So price of beer will fall

Hence the answer is option C