Barriers to entering an industry
A) encourage allocative efficiency.
B) encourage productive efficiency.
C) are the basis for monopoly.
D) apply only to purely monopolistic industries.

Question

Quizplus · Accepted Answer

Barriers to entering an industry are factors that make it difficult or impossible for new firms to enter the market and compete with existing firms. These barriers can include things like high start-up costs, exclusive access to key resources, patents or other legal protections, or economies of scale. When these barriers create a situation in which only one or a few firms are able to compete in the market, this can lead to a monopoly. Monopolies are not efficient for consumers because they typically result in higher prices and lower output than would exist in a competitive market. Therefore, barriers to entry are the basis for monopoly and do not encourage either allocative or productive efficiency.

Barriers to Entering an Industry