Answer to Question #62818 in Microeconomics for John Smith

Question

Given your answer for question 1, would you expect economics profits in the industry?
a. Explain
i. Identify some of the barriers to entry and exit (if any) that may
exist in the market?

REFER TO THIS BELOW: http://www.theguardian.com/business/interactive/2010/jan/20/cadbury-kraftnestle-mars-ferrero

Answer 1

a. You can expect economics profits in the industry when price is higher than or equal to the average total costs P >= ATC.
i. Possible barriers to entry:
- Economies of size
- Capital intensive
- Intellectual property
- High switching costs
- Established brand identity
- Permitting requirements
- Government standards.
Possible Barriers to Exit:
- Investment in specialist equipment
- Specialized skills
- High fixed costs.