In the long run, the number of sellers and the level of profit in a market are both affected heavily by the _____ in the market.
A)type of product
B)level of variable costs
C)strength of the barriers to entry
D)income tax levels

Question

Quizplus · Accepted Answer

The strength of barriers to entry in a market heavily influences the number of sellers that can enter the market. If there are high barriers to entry, such as high start-up costs or strong brand loyalty among existing customers, then it will be difficult for new sellers to enter the market and compete with existing firms. This can lead to a smaller number of sellers and higher profits for those firms that are already established in the market. On the other hand, if there are low barriers to entry, then new sellers can easily enter the market and compete with existing firms, which can lead to a larger number of sellers and lower profits for each individual firm. Therefore, the strength of barriers to entry is a key determinant of the long-term structure of a market.

In the Long Run, the Number of Sellers and the Level