Question

1. Classify the following as a government-enforced barrier to entry, a barrier to entry that is not government-enforced, or a situation that does not involve a barrier to entry. a. A patented invention b. A popular but easily copied restaurant recipe c. An industry where economies of scale are very small compared to the size of demand in the market d. A well-established reputation for slashing prices in response to new entry e. A well-respected brand name that has been carefully built up over many years

Short answer

a. A patent is a government-imposed entrance barrier.

b. This is not an entry barrier.

c. This is not an entry barrier.

d. This is an entry barrier, although it is not enforced by the government.

e. Although this constitutes a barrier to entry, it is not directly enforced by the government.

Step-by-step solution

Step 1a: Definition

Entrance Barriers: In economics, entry barriers refer to the expenses that new entrants must pay to enter a market, whereas incumbents do not have to pay these costs. Barriers to entry can exist naturally or be imposed by the government, and they usually restrict market competition.

Step 2a:Explanation

A patent is a government-created barrier to entry.

Step 3b: Given the information

A popular but easily copied restaurant recipe.

Step 4b: Explanation

This is not a barrier to entry.

Step 5c: Given the information

An industry where economies of scale are very small compared to the size of demand in the market.

Step 6c: Explanation

This is not a barrier to entry.

Step 7d: Given

A well-established reputation for slashing prices in response to the new entry.

Step 8d: Explanation

Although the government does not enforce it, this is an entry barrier.

Step 9e: Given

A well-known brand that has been carefully cultivated over many years.

Step 10e: Explanation

Although this is a barrier to entry, the government does not enforce it directly.