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.

Answer: (B)

Verified step by step guidance

1. 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.
2. 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.
3. Step 3: Recognize that high startup costs require significant investment before entering a market, which is a financial barrier to entry.
4. Step 4: Understand that barriers to entry can prevent new firms from entering an industry, which limits competition.
5. 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.