Final answer:
Barriers to entry can be government-enforced or arise naturally, such as legal restrictions, economies of scale, control of critical resources, and brand reputation. Government-enforced examples include taxi licensing laws and patented inventions. Non-governmental examples include control of a resource like a water spring and a well-established brand name.
Step-by-step explanation:
Barriers to entry are factors that prevent or discourage competitors from entering a market. These barriers can be government-enforced, such as legal restrictions on competition, or they can arise naturally within the market, such as through economies of scale that lead to a natural monopoly. Here we will classify a series of scenarios into these categories:
- Government-enforced barrier to entry: A city passes a law on how many licenses it will issue for taxicabs, a law mandating that taxi drivers must pass a safety test and have insurance, and a patented invention.
- Barrier to entry that is not government-enforced: A well-respected brand name, ownership of an essential resource like a pure water spring, a well-established reputation for predatory pricing, and a well-known trademark.
- No barrier to entry: A popular but easily copied restaurant recipe, and an industry where economies of scale are very small compared to the size of demand in the market.
In summary, while economies of scale, control of an essential resource, and differentiated products are barriers to entry, scenarios without large economies of scale or easily replicated attributes typically do not involve barriers to entry.