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Which two important functions does a market system perform?
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1. Introduction to Microeconomics
Introduction to Economics
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Which of the following is NOT true about barriers to entry in a market?
A
Patents can act as legal barriers to entry.
B
Barriers to entry always result in perfectly competitive markets.
C
Barriers to entry can prevent new firms from entering an industry.
D
High startup costs are an example of a barrier to entry.
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Step 1: Understand the concept of barriers to entry. Barriers to entry are obstacles that make it difficult for new firms to enter a market. These can be legal, financial, technological, or strategic.
Step 2: Analyze each statement in the problem. For example, patents are legal protections that prevent other firms from using certain technologies, so they act as legal barriers to entry.
Step 3: Recognize that high startup costs require significant investment before entering a market, which is a financial barrier to entry.
Step 4: Understand that barriers to entry can prevent new firms from entering an industry, which limits competition.
Step 5: Identify the incorrect statement: barriers to entry do not always result in perfectly competitive markets. In fact, barriers to entry often reduce competition, which is contrary to the conditions of perfect competition.
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