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Homework answers / question archive / Why is it more difficult for firms to enter an oligopolistic industry than a highly competitive one? a
Why is it more difficult for firms to enter an oligopolistic industry than a highly competitive one?
a. The low initial profits in the industry act as a deterrent for firms looking to enter the market.
b. There are significant barriers to entry, including high startup costs.
c. The market power of existing firms in the industry acts as a barrier to entry.
d. New firms have difficulty differentiating their product in significant ways from the products of existing firms.
The answer is b. There are significant barriers to entry, including high startup costs.
An oligopoly is when there are two or more firms that have a significant market share. In such a market, entry costs are high which makes it difficult for new companies to enter. Examples of markets that typically are oligopolies are oil and steel markets.
