Concentration ratios and barriers to entry

Question 1

define N-firm concentration ratio

Answer 1

a measure of the market share of the largest ‘n’ firms in an industry

Question 2

Definition of barrier to entry

Answer 2

A characteristic of a market that prevents new firms from readily joining the market

Question 3

Definition of barrier to exit

Answer 3

A characteristic of a market that prevents new firms from readily leaving the market

Question 4

Whats a patent

Answer 4

legal protection against others copying your invention without payment

Question 5

what is market share calculated as??

Answer 5

a % of sales in a market done by an individual firm

Question 6

5 examples of barriers to entry

Answer 6

• Research and development= products or services that cost a lot to produce due to research and development
• Brand= brand awareness increases brand loyalty which decreases the likelihood of new firms gaining these existing customers
• Economies of scale= big firms that already exist in a market can better exploit economies of scale eg purchasing.
• Licenses- government regulation that incurs a cost on new firms entering a market ie a pub
• planning permission- government regulation which prevents some land being used for expansion etc