Barriers to Entry

Definition

Barriers to entry refer to obstacles that prevent or limit new firms from entering an industry or market. These barriers can be natural (such as high capital requirements) or created by existing firms (such as patents).

Related terms

Economies of Scale: This refers to cost advantages that larger firms enjoy due to their size and production levels.

Patent: A patent is an exclusive right granted by the government that allows inventors or creators of new products/processes to exclude others from using their invention for a specific period.

Natural Monopoly: A natural monopoly occurs when one firm can efficiently serve an entire market due to economies of scale, making it impractical for other firms to enter.