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What is barrier to entry?
Any obstacle that prevents a new firm entering a market.
What is barrier to exit?
Any obstacle that prevents a firm from leaving a market.
What are the 4 main reason barriers to entry exists:
Legal reasons
Technical reasons
Strategic reasons
Brand Loyalty
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
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: