A natural barrier to entry is defined as a barrier that arises because of
A) technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.
B) patents or licenses that exclude others from producing a good or service.
C) many firms producing the good and thereby allowing choice for all consumers.
D) anticompetitive practices by a firm that keep other firms from producing.
E) one firm owning a key natural resource.

Question

Quizplus · Accepted Answer

A natural barrier to entry arises when one firm can meet the entire market demand at a lower average total cost than two or more firms. This is because of the technology used by the firm, which makes it difficult for new entrants to compete on cost. This barrier is natural because it arises from the characteristics of the industry or market rather than from intentional actions of existing firms.

A Natural Barrier to Entry Is Defined as a Barrier