Question

A few questions in this problem set are based on the comments made by James Love to Congress regarding antitrust policy and the Petroleum industry. These are found at the end of the module on Antitrust Policy. Try to read the entire article carefully first... and then see if you can answer the questions (rather than fishing out the answer each time). Obviously you will go back and check to make sure you have it correct ... but to absorb the content it is best read it all first before going back. What is it about the petroleum industry that simultaneoulsy prevents entry and fosters joint ventures and other collaberations

Answer 1

Answer:

High fixed (and sunk) costs

Explanation:

Petroleum industry is marked by high fied and sunk cost as exploration of oil is an expensive business. The companies need to spend a lot of money on technology and machinery and even that does not guarantee success. Hence all these fied cost and sunk cost make the entry of new firm difficult.