Chapter 12R, Problem 2CTQ

To determine

The barriers for following industries:

1. Electric power utilities industry.
2. Word-processing software
3. Cold remedies
4. Textbooks
5. Family medicines

Explanation of Solution

1. Following are the barriers for electric power utilities:
• It is generally owned by public sector which is responsible for distribution of electricity and it does this under monopoly. Therefore, there are high barriers to entry or exit.
• Legal barriers as electricity distribution should be fair for every customers.
• Barriers due to high competition.
2. Following are the barriers for word processing software:
• Technical barriers where people selling word processors must possess good technical knowledge.
• High competition where price needs to be kept lower to compete in the market for this costly product.
3. Following are the barriers for cold remedies providing firms:
• Due to massive competition, firms have to keep their prices very low.
• The profit earned can be normal, this reduces the barriers to entry or exit for other firms.
4. Following are the barriers for textbooks:
• Publishing textbook is a costly affair that every writer does not afford.
• Another barrier is to find a good publisher who can publish the textbooks.
• Marketing and advertising such books is also involves cost. Thus it hinders the firm to enter such industry.
5. Following barriers to family medicines:
• Family medicines are not approved medically which can be sold or bought in the market.
• In medical sector, legal compliances are very high.
• Also, firm needs to be very cautious in selling medicines as it may have side effect.

Economics Concept Introduction

Barriers to industry: Barriers to an industry refers to the hindrances that are imposed by various means preventing a firm to enter or exit such industry. For instance, if a company wants to enter a music industry then it has to follow various legal compliances which can act as barrier for small companies.