Barriers to Entry and Exit
Barriers to Entry and Exit
Courses Info
Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes
Barriers to Entry and Exit
Barriers to Entry are factors which prevent new firms from entering a market or an existing firm from expanding into other markets
Barriers to Exit are factors which make it more difficult for a firm to leave a market
Types of Barriers to Entry and Exit
- Limit Pricing – firms set a price below the profit maxisiming level to deter the entry of other firms into the market
- Predatory Pricing – selling a product below the cost of producing it to reduce competition and force rivals out of the market
- Economies of Scale – this barrier to entry exists due to the nature of the business
- Patents – this is type of legal barrier to entry enforced by the Government, for a short term purpose. It restricts entry rather than prevents it
- Brand Loyalty – may discourage competitors from entering the market as they need to spend heavily on marketing and promotion to build a strong relationship with their customers
- Licenses – this acts as legislation allowing firms to operate. Enforcement of licenses restricts access to the market
Quick Fire Questions – Knowledge Check
1. Define ‘Barriers to Entry’ (2 marks)
2. Define ‘Barriers to Exit’ (2 marks)
3. Explain five types of Barriers to Entry / Exit (10 marks)
Next Revision Topics
A Level Economics Past Papers
