ECONOMICS
COMPETITION AND MARKET STRUCTURES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
Laissez-Faire
|
|
Game Theory
|
|
Nash Equilibrium
|
|
Barrier to Entry
|
Detailed explanation-1: -Common barriers to entry include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs. Other barriers include the need for new companies to obtain licenses or regulatory clearance before operation.
Detailed explanation-2: -Artificial (Strategic) Barriers to Entry Limit pricing: When existing firms set a low price and a high output so that potential entrants cannot make a profit at that price. Advertising: These are sunk costs. The higher the amount spent by incumbent firms, the greater the deterrent to new entrants.
Detailed explanation-3: -Barriers to entry generally fall under three categories, artificial, natural, and government. Natural refers to structural barriers to entry, artificial refers to strategic barriers to entry, and government refers to regulation and legal requirements established by governments.
Detailed explanation-4: -The types of barriers to entry are capital costs, competition, legal barriers, marketing barriers, limited market, predatory pricing, finding suppliers, master of technology, learning curve, and economies of scale.
Detailed explanation-5: -There are 4 main types of barriers to entry – legal (patents/licenses), technical (high start-up costs/monopoly/technical knowledge), strategic (predatory pricing/first mover), and brand loyalty.