EBK MICROECONOMICS: PRIVATE AND PUBLIC
16th Edition
ISBN: 8220103612142
Author: Gwartney
Publisher: Cengage Learning US
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Question
Chapter 11, Problem 1CQ
To determine
Effect of barriers to entry to attain the long run profit.
Expert Solution & Answer
Explanation of Solution
Barriers to entry are crucial for the existence of long run profit. It is because a firm can make profit in the short run. However, if there are no barriers to entry, other firms will enter into the market to capture the profit and they increase the supply of products. The price will decrease due to the increase in the supply. This will result in the elimination of the profit in the market and it becomes a zero profit in the long run. However, the long run profit is not solely on the barriers to entry. It is also based on the demand for a particular good.
Economics Concept Introduction
Barriers to entry: Creating the obstacles like high startup cost and other barriers to prevent the entrance of new firm in the market.
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Chapter 11 Solutions
EBK MICROECONOMICS: PRIVATE AND PUBLIC
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