Question

What are barriers to entry, and how do they inhabit the proper functioning of a market?

Answer 1

Barriers to entry are the hurdles faced by new firms that prevent them or make it difficult for them to enter an industry or area of business.

Examples:

High cost at the time of startup

Difficulty to compete with existing firms

Technology

No brand recognition initially

Customers' loyalty to existing firms

Barriers to entry lead to monopoly in the market. They prevent new entrants into the market, hence making the existing one monopolistic. They lead to price rise by reducing competition in the market.