Which of the following statements is true about government regulations in the context of entry barriers of an industry?
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 reduces 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

Government regulations often act as entry barriers for new firms, making it difficult for them to enter the industry. However, falling entry barriers due to government deregulation often results in increased competition, as new firms can enter the industry more easily. This increased competition can lead to lower industry profit rates. Therefore, statement C is true. Statements A, B, D and E are incorrect.

Which of the Following Statements Is True About Government Regulations