Describe the three general types of barriers
What will be an ideal response?
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.
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Antitrust risks from vertical integration are usually ______than those from horizontal integration
a. Higher b. Lower c. About the same as d. None of the above
Inter industry competition refers to the fact that:
A. Monopolistic producers establish a common price for their products B. Products are identical in a purely competitive industry C. Firms which sell a product at one stage of production buy materials and parts from other firms at prior stages of production D. In some markets the producers of a certain commodity might face competition from products of other industries