What is a consequence of having high barriers to entry in a market?

What is a consequence of having high barriers to entry in a market?

• A. Increased variety of products for consumers
• B. Higher levels of competition and innovation
• C. Reduced market entry from new firms
• D. Lower prices for consumers

Answer: (C)

High barriers to entry in a market create obstacles that make it difficult for new firms to enter and compete. Such barriers can include substantial startup costs, regulatory requirements, access to distribution networks, and strong brand loyalty established by existing firms. As a result, the presence of these obstacles prevents many potentially competitive firms from entering the market. This leads to a limited number of players in the market, often resulting in a concentration of market power among the existing firms. Consequently, without new entrants, competition remains subdued, and innovation may decline as the established firms face no pressure to improve their offerings. In contrast, high barriers to entry do not lead to increased product variety, higher competition, or lower prices. Instead, they typically result in fewer options for consumers, less competitive pricing, and stagnation in innovation due to the lack of new competitors.

High barriers to entry in a market create obstacles that make it difficult for new firms to enter and compete. Such barriers can include substantial startup costs, regulatory requirements, access to distribution networks, and strong brand loyalty established by existing firms. As a result, the presence of these obstacles prevents many potentially competitive firms from entering the market. This leads to a limited number of players in the market, often resulting in a concentration of market power among the existing firms. Consequently, without new entrants, competition remains subdued, and innovation may decline as the established firms face no pressure to improve their offerings.

In contrast, high barriers to entry do not lead to increased product variety, higher competition, or lower prices. Instead, they typically result in fewer options for consumers, less competitive pricing, and stagnation in innovation due to the lack of new competitors.