Author Question: Describe the three general types of barriers. What will be an ideal ... (Read 106 times)

urbanoutfitters · **on:** Jun 29, 2018

Describe the three general types of barriers.

What will be an ideal response?

Question 2

What effect will an increased demand for housing in the suburbs of a major city have on the cost of vegetable farming in the suburbs?

A) No effect, since one cannot grow vegetables on land on which housing has been constructed.
B) The cost will decline because only very fertile land will now be used for growing vegetables.
C) The cost will rise because it will become more expensive to grow vegetables.
D) The cost won't change, because there has been no change in physical conditions.
E) We cannot predict unless we know what has happened to the demand for vegetables.

mariahkathleeen · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Barriers to entry can be divided into legal barriers, ownership barriers, natural barriers. Legal barriers occur when government action blocks competition in a market. For instance, the government could grant a public franchise, government license, patent, or copyright. In all cases, the government action prevents other firms from entering the market. Ownership barriers occur when a firm buys a significant portion of a natural resource. For instance, DeBeers controls over 80 percent of the world's diamond market. The last barrier to entry is a natural barrier. A natural barrier to entry occurs when economies of scale are so large that they make it possible for one firm to meet the entire market demand at a lower price than could two or more firms. In this case, the market will naturally evolve to become a monopoly as a larger firm uses its cost advantage to cut its price and drive its high-cost, smaller competitors out of business.

Answer to Question 2

C