Barriers to Entry/Exit

Question 1

Barriers to Entry

Answer 1

Any obstacle that prevents a new firm from entering the market

Question 2

Legal Barriers to Entry Examples

Answer 2

• Patents
• Licenses / Permits
• Red tape [Excessive Bureaucracy]
• Standards and Regulation
• Insurance

Question 3

Technical Barriers to Entry Examples

Answer 3

• Start up Costs
• Sunk Costs
• Economies of Scale
• Natural Monopoly

Question 4

Strategic Barriers to Entry Examples

Answer 4

• Predatory Pricing
• Limit Pricing
• Excessive Advertising

Question 5

Brand Loyalty

Answer 5

~ Difficult for firms to enter the market and compete

Question 6

Barriers to Exit

Answer 6

Any obstacle that prevents a firm from leaving the market

Question 7

Barriers to Exit Examples

Answer 7

~ Undervaluation of Assets
~ Redundancy Costs
~ Sunk Costs
~ Penalties for leaving Contracts early