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Chapter 9: Q.8 (page 232)

What is a barrier to entry? Give some examples.

Short Answer

Expert verified

The barrier to entry means obstacles faced by firms to enter the market,

it can impose by existing firms or the government.

Step by step solution

01

Step 1. Meaning

Barriers are obstacles that make it very difficult to enter a given market, barriers to entry can be imposed by two means either by existed firm or taxation by the government.

Barrier entry includes:

Government regulations

Strong brand identity

Customer loyalty

Patent protection

Licensing requirement

02

Step 2. example

A company gets a patent for product X for five years means, that no other seller can sell that product X.

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Most popular questions from this chapter

Suppose the demand for a monopoly’s product falls so that its profit-maximizing price is below average variable cost. How much output should the firm supply?

What is predatory pricing?

What is a legal monopoly?

Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?

2. Classify the following as a government-enforced barrier to entry, a barrier to entry that is not government-enforced, or a situation that does not involve a barrier to entry.

a. A city passes a law on how many licenses it will issue for taxicabs

b. A city passes a law that all taxicab drivers must pass a driving safety test and have insurance

c. A well-known trademark

d. Owning a spring that offers very pure water

e. An industry where economies of scale are very large compared to the size of demand in the market
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