Which of the following scenarios is NOT an example of a barrier to entry in a market?

• A. Existing firms have established strong brand loyalty among consumers.
• B. A firm has exclusive ownership of a key resource needed for production.
• C. New firms can freely enter the market and compete without restrictions.
• D. A government requires new firms to obtain costly licenses before operating.

Answer: (C)

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 scenario to determine if it restricts or prevents new firms from entering the market:
3. Scenario 1: Existing firms have strong brand loyalty, which makes it harder for new firms to attract customers. This is a barrier to entry because it creates a competitive disadvantage for newcomers.
4. Scenario 2: A firm has exclusive ownership of a key resource, preventing others from accessing it. This is a barrier to entry because it limits the ability of new firms to produce the good or service.
5. Scenario 3: New firms can freely enter the market and compete without restrictions. This is NOT a barrier to entry because there are no obstacles preventing entry.
6. Scenario 4: Government requires costly licenses for new firms. This is a barrier to entry because it imposes additional costs and regulatory hurdles on potential entrants.