Which of the following statements about government regulations in the context of entry barriers of an industry is true?
A) Government deregulation in an industry results in significant reduction in competition.
B) Government regulation is not a major entry barrier for any industries.
C) Falling entry barriers due to government deregulation results in higher competition and lower industry profit rates.
D) The threat of new entrants is reduced when the government deregulates an industry.
E) Companies that enjoy brand loyalty and have significant scale economies are the ones who face major threat of competition due to government deregulation.

Question

Quizplus · Accepted Answer

Falling entry barriers due to government deregulation results in higher competition and lower industry profit rates. When government regulates an industry, it creates entry barriers that limit the number of firms that can compete. These barriers include licensing requirements, safety standards, and environmental regulations. When the government deregulates an industry, these barriers fall, making it easier for new firms to enter the market. This increased competition leads to lower industry profit rates.

Which of the Following Statements About Government Regulations in the Context