Question

If a company strengthens its barrier to entry, what impact would that likely have on ROE? Why?

Answer 1

If a company strengthens its barriers to entry, its ROE will increase because since the competition in forms of other business will reduce and thus the supply will not increase keeping the demand constant. Thus there will be a few or very less companies producing the same good which can be priced higher too by forming a cartel with few firms in the industry producing good. The high barriers to entry will make sure that no more entrance of new firms is allowed

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