In what ways is government involved with the creation of barriers to entry?
What will be an ideal response?
The government often erects barriers to entry by requiring licenses and franchises before firms can legally operate in a market, by granting patents, by assessing tariffs, or by implementing specific regulations that limit entry. It is illegal to enter many industries without a government license, and often the number of such licenses is limited. Patents create a legal monopoly for a period of 20 years, and tariffs help to keep out competition from foreign firms.
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Mr. Smith pays $20,000 annually as tax. If his annual income is $100,000, what is his average tax?
A) 5% B) 12% C) 2% D) 20%
In the foreign-exchange market, trading
A) is restricted to the hours 10 A.M. to 3 P.M. New York time. B) may not take place after 5 P.M. London time. C) takes place at any hour of the night or day. D) takes place at prices set by the U.S. government in consultation with the governments of other leading countries.