ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An incentive to restrict a producer’s access to a market and limit competition
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An obstacle that can restrict a producer’s access to a market and limit competition
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A method used to restrict a producer’s access to a market and limit competition
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A method used to allow a producer into a market to grant even more competition
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Detailed explanation-1: -One of the most common barriers to entry for new players is the cost of entering a market. The equipment they use to make their products, the buildings they make them in and work from, and the raw materials all incur costs.
Detailed explanation-2: -Barriers to entry is an economics and business term describing factors that can prevent or impede newcomers into a market or industry sector, and so limit competition. These can include high start-up costs, regulatory hurdles, or other obstacles that prevent new competitors from easily entering a business sector.
Detailed explanation-3: -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.
Detailed explanation-4: -Depending on the industry, emerging businesses may face obstacles that are relatively straightforward to overcome (low barriers to entry), those that are impossible to overcome without extensive resources (high barriers to entry) – or both.
Detailed explanation-5: -Economies of scale. Product differentiation. Capital requirements. Switching costs. Access to distribution channels. Cost disadvantages independent of scale. Government policy. Read next: Industry competition and threat of substitutes: Porter’s five forces.