3. Which of the following is not a barrier to entry?
A. Patents
B. X-inefficiency
C. Economies of scale
D. Ownership of essential resources

Question

3.    Which of the following is not a barrier to entry?
A.    Patents
B.    X-inefficiency
C.    Economies of scale
D.    Ownership of essential resources

BlackTom AI · Accepted Answer

Consider the concept of barriers to entry in a market. When evaluating each option, think about whether it inherently makes it harder for new firms to enter a market or whether it reflects factors that can coexist with entry.
Option A: Patents. Patents grant exclusive rights to produce or sell a novel product or process, which directly hinders new competitors from freely entering the market for a period of time. This is a classic barrier to entry.
Option B: X-inefficiency. X-inefficiency refers to the excess cost that firms experience due to lack of competitive pressure, often because there is little rivalry in the industry. It is not a barrier that prevents new entrants from entering; instead, it describes inefficiency within firms that may persist after entry but does not by itself block entry.
Option C: Economies of scale. When large-scale production lowers average costs, new entrants face a disadvantage because incumbents can undercut prices or offer more competitive pricing due to lower costs. This constitutes a barrier to entry.
Option D: Ownership of essential resources. If a single firm controls essential inputs or resources necessary to produce a good, it can prevent or restrict other firms from entering the market, representing a barrier to entry.
In summary, patents, economies of scale, and control of essential resources are established barriers to entry, whereas X-inefficiency describes internal cost inefficiencies rather than a structural entry barrier. Therefore, the statement that aligns with 'not a barrier to entry' is the one describing X-inefficiency.

3. Which of the following is not a barrier to entry? A. Patents B. X-inefficiency C. Economies of scale D. Ownership of essential resources

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