Barriers to entry are forces that inhibit firms from entering new markets. These forces may result from practical and legal constraints. How do you think barriers to entry and product homogeneity affect the competitive nature of industries? For example, why do some agricultural products, such as wheat and soybeans, tend to fit the definition of perfectly competitive markets more than the automobile industry does? Does this mean that companies in the automobile industry do not compete with one another? In this Application, you will analyze market competition by providing examples.
Explain the nature of competition in a market that is characterized by a high barrier to entry and a significant product homogeneity. Provide a detailed example, and support your point of view.