The starfire coffee chain was the only coffee-shop chain and meeting place in many american cities for more than 12 years. people paid $5 for a mug of peppermint coffee and the experience of sitting in front of a roaring fire, chatting with friends. twelve years after starfire's appearance, a similar coffee-shop chain, reindeer brews, entered the marketplace. reindeer charges $3 for a mug of hot cocoa and a similar community experience. how would you characterize this scenario?

A new competitor has circumvented the entry barriers and entered in the former monopoly that Starfire Coffee chain has held for 12 years. In this case the entry barriers were double.

On the first hand, the potential competitor had to be able to produce at a low cost to compete in prices with the already established firm. It was able to achieve so by offering the same product for 3 instead of 5.

Moreover, it had to compete with a firm that counted with the loyalty of customers. This loyalty is actually the base of its monopoly. In such case, the potential competitor needs to develop a high quality product that is able to attract and change the consumption habits of consumers who were loyal to the former monopolist.

the correct answer is d