BARRIERS TO ENTRY & EXITY(MONOPOLY POWER)

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6 Terms

1
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What is barrier to entry?

  • Any obstacle that prevents a new firm entering a market.

2
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What is barrier to exit?

  • Any obstacle that prevents a firm from leaving a market.

3
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What are the 4 main reason barriers to entry exists:

  • Legal reasons

  • Technical reasons

  • Strategic reasons

  • Brand Loyalty

4
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What are the legal reasons for barrier of entry?

  • Licence/permits to operate in the market(might be expensive or all given out in theta market.

  • Regulations, might be too strict and stop firm from entering

  • Insurance, firm might need certain insurance

5
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What are the technical reasons for barrier of entry?

  • Start up costs might be very high

  • Sunk costs : costs that can’t be recovered when firm leaves the market like advertising and specialists machinery (more risk of entering market)

  • Economies of scale :

  • Natural monopoly:

6
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