Why would economies of scale be a barrier to entry?
What will be an ideal response?
If significant economies of scale exist in an industry, then the long-run average costs can decline over a wide range of output rates so that it may not be profitable for more than one firm to exist in that industry. This is the case of a natural monopoly, which is able to underprice potential competitors and keep them out of the market.
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Suppose a firm has a variable cost function VC = 20Q with avoidable fixed cost of $50,000. What is the firm's average cost function?
A. AC = 50,000 + 20Q B. AC = (50,000/Q) + 20 C. AC = 50,000 + 40Q D. AC = 20
The ____ heuristic observes that when facts are at issue the correct answer is often the one people recognize, and the incorrect answer is the one they do not
a. representative b. availability c. recognition d. elimination
Other things the same, if the U.S. price level falls, then
a. U.S. residents want to buy more foreign bonds. The real exchange rate rises. b. U.S. residents want to buy more foreign bonds. The real exchange rate falls. c. U.S. residents want to buy fewer foreign bonds. The real exchange rate rises. d. U.S. residents want to buy fewer foreign bonds. The real exchange rate falls.
Which of the following would increase a country's Economic Freedom of the World rating?
What will be an ideal response?