Two possible reasons for the existence of an imperfectly competitive market are:
A)product differentiation and free trade.
B)constant returns to scale and a lack of market regulation.
C)increasing returns to scale and barriers to free entry.
D)a lack of market segmentation and "U" shaped marginal cost curves.
E)none of the above.

Question

Quizplus · Accepted Answer

Increasing returns to scale mean that as production increases, unit costs decrease. This gives larger firms a cost advantage over smaller competitors, creating a barrier to entry and reducing competition. Barriers to entry can take various forms, such as legal regulations, technological requirements, or economies of scale. Together, increasing returns to scale and barriers to entry generate imperfect competition, where a limited number of large firms dominate the market.

Two Possible Reasons for the Existence of an Imperfectly Competitive