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In: Economics

1. Why are entry barriers necessary for antitrust policy concerns about monopolization, pricefixing, and mergers? 2....

1. Why are entry barriers necessary for antitrust policy concerns about monopolization, pricefixing, and mergers?

2. Suppose that production of widgets requires capital and labor. The production function is constant returns to scale and capital investment is sunk. There are no other barriers to entry. Is the investment in sunk capital a barrier to entry? Explain. What will the market equilibrium be if there are many possible entrants?

3.The decision of two banks to form a network of compatible ATMs will make the services of these two banks closer substitutes, and likely lead to more aggressive competition between them in deposit rates. At the same time there will be a positive "network effect" because account holders of both banks have access to a larger ATM network. This trade off between the benefits of compatibility and the costs in terms of tougher competition is a common one in high-technology industries where standardization is important. Can you think of other examples?

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Rahul Sunny answered 2 years ago
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