1. Barriers to entry enhance the market power of many business organizations bec
ID: 1160126 • Letter: 1
Question
1. Barriers to entry enhance the market power of many business organizations because they make it difficult for would-be competing firms to enter into an established market. Describe each of the government barriers to entry set forth below: a. Patents b. Regulations c. Business Taxes
1A. What are some basic economic pros and cons of government regulation?
2. With your MBA in hand from Indiana Tech University and a few years of experience under your belt, you have recently been hired to serve as the business manager of a fairly large company. The company faces very tough competition from one primary competitor, and so you are tasked with recommending a strategy to try to eliminate this competitor. Reviewing your coursework in MBA 5120, your options come down to either limit pricing or predatory pricing. Which pricing method will you recommend, and explain why? (Select only one pricing strategy; not both strategies or combinations of both strategies.)
A. Is the pricing method you chose guaranteed to work? Explain why or why not.
Explanation / Answer
a) Patents : It is a set of exclusive rights granted to an inventor for a particular period of time in exchange for detailed public disclosure of an invention . As for example if a company gets a patent for manufacturing a medicine then that company can only legally manufacture and sell the medicine . Any other company trying to copy the formula will commit an offence .
b) Regulations : Market can be regulated through laws made by the government . Certain regulations like permits , cap on production limits are barriers to entry which concentrate market power .
c) Business taxes : they raise the cost of production which many small companies cannot afford . So only larger ones stay in the market and has considerable market power .
Pros : Government regulation causes consumer protection , property rights and patents leads to innovation and efficiency , taxes spent on social benefits etc .
Cons : too much regulation inhibits growth , patents can lead to monopoly markets , dependency on government programmes .
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