Which of the following would be a reason why incumbents may have an absolute cost advantage over entrants?

A. Incumbents may have plants in the most desirable locations.
B. Incumbents' output may be greater.
C. Incumbents may be able to offer lower prices than entrants.
D. Entrants face an opportunity cost of using scarce inputs, but incumbents do not.

Incumbents may have an absolute cost advantage over entrants due to the location of their plants, the economies of scale they achieve, and their established customer base.

Explanation:

One reason why incumbents may have an absolute cost advantage over entrants is because they may have plants in the most desirable locations, which allows them to save on transportation costs and access resources more efficiently.Another reason is that incumbents' output may be greater than that of entrants, enabling them to achieve economies of scale and lower their average costs.

Additionally, incumbents may be able to offer lower prices than entrants because they have already established a customer base and have the ability to negotiate better deals with suppliers.Therefore, the correct answer is option A: Incumbents may have plants in the most desirable locations.

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