Which of the following can be a barrier to entry, closing a market to new firms?
A) an elastic industry demand curve
B) control of a vital resource by one producer
C) diseconomies of scale
D) ease of obtaining capital financing
Answer: B
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Refer to the demand and supply diagram that relates to the health care market. If suppliers provide whatever quantity of health care is demanded, health care insurance causes:
A. resources to be underallocated to the health care industry.
B. resources to be overallocated to the health care industry.
C. health care to be underconsumed.
D. the price of health care to the insured to be higher than the market price.
Day care is provided by a competitive constant-cost industry at a price of $40 per child per day. The government wants to increase the availability of day care and thus chooses to build and operate 50 new day care centers across the nation.
(i) In the short run, what happens to the price of day care? Does the total amount of day care provided increase in the short run? What happens to the profits of day care centers? (ii) In the long run, what happens to the size of the day care industry? What happens to the price of day care and the profits of day care centers? Does the total amount of day care provided increase in the long run?