The major barriers to entry into an industry.

The major barriers to entry into an industry.

Discuss the major barriers to entry into an industry. Explain how each barrier can foster monopoly. Can any barrier be socially justifiable?

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1. When first entering into industry there are barriers that companies or individuals face, an example of this is the economic scale now what this means is a market where only one company can really operate due to cost advantage then it becomes easy for a monopoly to be made. Another example of this is in certain markets it is hard for new companies to be able to compete and create products due to the fixed cost or variable cost to create products, which means the more it costs the less likely it is that new companies can start up and leaving solely the big companies that have more money without any competition and creating a monopoly. These are just a few examples of barriers that can lead to creating a monopoly. the second example especially when a new company is first starting it can be very difficult to not only be successful but also to compete with other big names and companies that have been creating products and making revenue for years, so it only makes sense that monopolies would come from this, due to lack of competitive ability for other newer companies. While it is not ideal, especially for consumers it’s the reality of the modern day due to the rising prices and the need for the competitive ability to be able to become a known product or resourceful option for consumers.


2. Monopolies frequently provide large economic profits due to the absence of competition. These gains ought to spur intense rivalry as outlined in Perfect Competition, but due to one specific monopoly feature, they do not. Entry barriers are the societal, economic, or technological factors that deter or forbid potential rivals from joining a market. Entry barriers can be anything from modest and manageable, like the cost of renting retail space, to incredibly onerous. For instance, the number of radio frequencies that can be used for broadcasting is limited. No new rivals can enter the market after the rights to all of them have been acquired. Barriers to entry can cause monopolies. Other times, they might only allow a small number of businesses to compete.There are four main obstacles to entering an industry. Economies of scale come first: The cost of production is dramatically reduced when output levels rise. Therefore, it is challenging for the new company to enter the market. Second, a substantial investment is necessary. Due to these barriers, businesses cannot readily enter the market. Third, certain businesses have access to resources found in nature. Therefore, it creates obstacles for new enterprises to enter. Finally, a small number of businesses use predatory pricing or limited pricing to reduce market competition.Patents and copyrights created barriers that are socially justified. Such intellectual property rights, motivate investment in research and development. So such entry barriers can be justified.

The major barriers to entry into an industry.


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