Question

When the government eliminates artificial barriers to entry Select one: a. more firms will enter the market. b. prices to consumers will likely increase. c. competition in the market will decrease. d. All of these will occur.

Answer 1

Answer:

The answer is A.

Explanation:

Barriers to entry deter firms from entering the market freely. Barriers to entry encourage imperfect market like monopoly or oligopoly. In imperfect market, that are characterised by barriers to entry, there will be little or no competition, price are determined by the suppplier. Also here, price will be at the discretion of the supplier.

But if all barriers are removed, there will be many firms entering the market, this will encourage more competition and will eventually drive price down.