Question

How might barriers of entry affect competition in the steel industry and lead to the formation of trusts?

a) Barriers of entry may increase competition and reduce the formation of trusts.
b) Barriers of entry may have no effect on competition in the steel industry.
c) Barriers of entry may decrease competition and lead to the formation of trusts.
d) Barriers of entry may lead to government intervention but not trusts.

Answer 1

Barriers to entry in the steel industry can limit competition and lead to the formation of trusts

Step-by-step explanation:

Barriers to entry can have a significant impact on competition in the steel industry and can lead to the formation of trusts. When barriers to entry are high, it becomes difficult for new firms to enter the market and compete with existing firms. This limited competition can create a situation where a few firms dominate the industry and form trusts to control prices and output.

For example, in the steel industry, barriers to entry can include high capital requirements to set up production facilities, access to raw materials, and economies of scale. These barriers can prevent new firms from entering the market and competing with established steel producers. As a result, a small number of firms may dominate the industry and form trusts to control prices and reduce competition.