Question

Firms operating in industries with high barriers to entry typically have relatively high economic profits.

Question 33 options:

	True
	False

Answer 1

True.

High barriers to entry are an important characteristic for the sustainability of attractive economic profits as it equips the businesses with flexibility and inherent strength. A high barrier to entry would mean you have something that your competitors doesn't have I.e. a patent or copyright. And ii your business model has a low barrier to entry, then it can be easily duplicated by competitors.

For a new entrant, there must be low barriers to entry, so that it could become easy to enter into a market and for the establishment of the business.

Barriers to entry are

1. Economies of scale.

2. Existing brand loyalty.

3. Buyer switching costs.

4. Capital

5. Incumbent advantages.

6. Distribution channels

7. Proprietary factors.

8. Government regulations.