Which of the following is an important source of entry barriers in a market?

• A. Perfect information among buyers and sellers
• B. Homogeneous products
• C. Low fixed costs
• D. Government licensing requirements

Answer: (D)

Verified step by step guidance

1. Understand what entry barriers are: Entry barriers are obstacles that make it difficult for new firms to enter a market and compete with existing firms.
2. Analyze each option in terms of how it affects the ease of market entry:
3. Perfect information among buyers and sellers typically reduces uncertainty and can make entry easier, so it is not an entry barrier.
4. Homogeneous products mean products are identical, which usually increases competition and does not create a barrier to entry.
5. Low fixed costs imply that the initial investment to enter the market is small, which lowers entry barriers rather than creating them.
6. Government licensing requirements impose legal or regulatory restrictions that new firms must satisfy before entering the market, making it a significant source of entry barriers.