Which of the following best describes a barrier to entry in a market?

• A. Perfect information available to all market participants
• B. Products that are identical and easily substituted
• C. A large number of buyers and sellers in the market
• D. High startup costs that prevent new firms from entering the industry

Answer: (D)

Verified step by step guidance

1. Understand the concept of a barrier to entry: it is any obstacle that makes it difficult for new firms to enter a market and compete with existing firms.
2. Analyze each option by considering whether it restricts or facilitates new firms entering the market.
3. Recognize that 'Perfect information available to all market participants' generally promotes competition and does not prevent entry.
4. Note that 'Products that are identical and easily substituted' increase competition and do not act as barriers.
5. Identify that 'High startup costs that prevent new firms from entering the industry' create a financial obstacle, which is a classic example of a barrier to entry.