QAEconomics › Which of the following is not a barrier to entry in an industry?
Q

Which of the following is not a barrier to entry in an industry?

A) Profit maximization

B) Strategic pricing

C) Government licensing

D) Economies of scale

A

Answer: B) Strategic pricing

Explanation: Strategic pricing can be defined as the act of setting the price of a product after evaluating the value of the product and other competitors selling the same product instead of the cost of manufacturing the product.

Strategic pricing is not a barrier to entry because it doesn’t stop a company from joining the market. In a market condition where it is very difficult to enter, some of the factors responsible may be government licensing, economies of scale, parenting, profit maximization, etc.

Profit maximization in economics can be defined as the process a company goes through in determining the price of a commodity, the amount input and output required — that may eventually bring the highest profit.

A company that enters a market offering to sell a product at a significantly lower price, will likely obtain a good deal of customers and become a market threat to its competitors.

3 years ago
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