The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-If barriers to entry exist in the market for a product, then:
A)the costs of entry and exit are relatively low.
B)there will be few close substitutes of the product in the market.
C)firms will be incurring losses in both the short run and the long run.
D)firms will tend to have relatively less monopoly power.
E)the existing firms will quit the market in the long run due to mounting losses.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-If barriers to entry exist in the market for a product, then:
A)the costs of entry and exit are relatively low. 
B)there will be few close substitutes of the product in the market. 
C)firms will be incurring losses in both the short run and the long run. 
D)firms will tend to have relatively less monopoly power. 
E)the existing firms will quit the market in the long run due to mounting losses.

Quizplus · Accepted Answer

If barriers to entry exist in the market for a product, then there will be few close substitutes of the product in the market. This gives the existing firms more market power to set prices and earn profits in the long run. Barriers to entry can include things like high start-up costs, patents, or government regulations. However, this does not necessarily mean that firms will be incurring losses or that they will have monopoly power.

The Figure Given Below Shows the Revenue and Cost Curves