Barriers to Entry (Quizlet Revision Activity)

Here are ten key terms relating to barriers to entry in monopolistic markets - test your understanding using this Quizlet revision activity

Summary of the key terms

Sunk costs

Costs that cannot be recovered if a business decides to leave an industry

Patents

Right under law to produce and market a good for a specified period of time

Licence

Permits a firm to operate in specific markets or locations e.g. to operate as a pub or a taxi business

Economies of scale

Cost advantages that a business can exploit by expanding the size of production

Brand loyalty

A measure of the degree of attachment that a consumer has for a particular product

Natural monopoly

Occurs when one very large business can supply the entire market at a lower unit cost and price than two

Market deregulation

Intervention by government to open up a market to new competition e.g. by lowering barriers to entry

Limit pricing

The strategy of reducing price to deter entry of potential entrants

Predatory pricing

A deliberate strategy of driving competitors out of a market by setting very low prices or selling below average variable cost

First mover advantage

Idea taken from Game Theory that early entry into a new market can give one firm a commercial edge over actual & potential rivals