Multiple Choice
In competitive markets, businesses need to keep track of and have constant knowledge about competitor pricing in order to:
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following is generally not considered a barrier to entry in competitive markets?
A
Perfect information about prices and products
B
Control over essential resources
C
Government licensing requirements
D
High start-up costs
Verified step by step guidance1
Step 1: Understand the concept of 'barriers to entry' in competitive markets. Barriers to entry are obstacles that make it difficult for new firms to enter a market and compete with existing firms. These can include factors like high costs, legal restrictions, or control over resources.
Step 2: Analyze each option to determine if it acts as a barrier to entry. For example, 'Control over essential resources' means existing firms have exclusive access to inputs needed for production, which prevents new firms from entering easily.
Step 3: Consider 'Government licensing requirements' as a barrier. Licensing can legally restrict entry by requiring firms to obtain permission before operating, which can be costly or difficult to obtain.
Step 4: Evaluate 'High start-up costs' as a barrier. If entering a market requires significant initial investment, this can deter new firms from entering.
Step 5: Examine 'Perfect information about prices and products.' In a perfectly competitive market, perfect information means all buyers and sellers know prices and product details, which actually facilitates entry and competition rather than hindering it. Therefore, this is generally not considered a barrier to entry.
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