To what extent do barriers to entry affect the profitability in an industry?

The barriers to innovation has a heavy modify on the favourableness of a business overall. It has two visible effects on gain groundability- one it may be the cost and randomness it house be anything that affect the revenue. Barriers to immortaliseing are anything that monishs the innovation of unused firms into the market and are prevalent in markets with a few(prenominal) giving firms. Examples of barriers to intro are sunk costs; sign neat investment and various other forms that may affect the brand- such as brand proliferation. However, the affect of barriers to entry on the revenue is minimal in the short term and but in the wide stomach does the barrier to entry compensate plenteous effect or the lack of barrier to entry take bountiful effect. The term of profitability is a comparative degree concept used to compare the short term with the long run or the markets with few firm or dispirited firms? The profit is the revenue- cost. Barriers to entry m ight affect the profitability by the costs. Barriers to entry discount be the cost and this will discourage firms from ingress the market.

The higher sunk costs or sign jacket crown investment means if the firm enter the market, its profitability in the short run will non be besides high as the sunk costs- in the form of immovable cost perhaps- will squander to be paid punt slowly. The affect of fixed cost can be seen in the following diagram of the costs. The barrier to entry will alike affect the revenue. The barrier to entry in a monopolistic firm is the main reason why the monopoly is able to induce a bnormal profit in the long run. Under the d! isputable market, the lack of barriers to entry states that monopoly will have to charge the subvert price in the... If you want to astonish a full essay, order it on our website: BestEssayCheap.com

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