Asked by Jasmine Thornton on May 01, 2024
Verified
Which of the following costs may provide barriers to entry in a market?
A) High research and development expenditures
B) License fees
C) Sunk costs associated with specialized facilities
D) all of the above
Sunk Costs
Expenses that have been incurred and cannot be recovered, which should not impact future business decisions.
Barriers to Entry
Obstacles that make it difficult for new competitors to enter a market, including high startup costs, legal restrictions, and strong brand identity.
Research and Development
Activities undertaken by companies or organizations to innovate and introduce new products or processes.
- Identify obstructions to perfectly competitive markets, such as entry barriers.
Verified Answer
AM
Aneece MuradMay 01, 2024
Final Answer :
D
Explanation :
All three options - high research and development expenditures, license fees, and sunk costs associated with specialized facilities - may provide barriers to entry in a market. High research and development expenditures may be necessary to develop new products or technologies, but new firms may not have the resources to match the expenditures of established firms. License fees may create a financial burden for new firms attempting to enter a market. Sunk costs associated with specialized facilities may deter new entrants because the costs of entering the market are too high to justify potential profits.
Learning Objectives
- Identify obstructions to perfectly competitive markets, such as entry barriers.