Final answer:
Antitrust law is the legislation designed to ensure free flow of trade and prevent anticompetitive practices. Barriers to entry can be government-enforced, such as limitations on licenses, or not, like a well-known trademark. Intellectual property laws sometimes hinder innovation by granting temporary monopolies.
Step-by-step explanation:
The law that you are not legally allowed to interfere with the free flow of trade and/or commerce is known as antitrust law. Antitrust law includes various rules and regulations that prevent monopolies and promote fair competition among businesses. For example, these laws prohibit agreements between firms to fix prices, rig bids, or divide markets.
When classifying barriers to entry, we consider:
- Government-enforced barrier to entry: A city passing a law on how many licenses it will issue for taxicabs fits this classification since it restricts the number of businesses that can enter the market.
- Barrier to entry that is not government-enforced: A well-known trademark represents a barrier that isn't imposed by the government but can prevent new competitors from entering due to market recognition and customer loyalty associated with the trademark.
- A situation that does not involve a barrier to entry: A city passing a law that all taxicab drivers must pass a driving safety test and have insurance doesn't create a barrier to entry but ensures safety and responsibility in the industry.
In some cases, intellectual property laws can hinder innovation by granting temporary monopolies. Critics like Milton Friedman have pointed out that industries such as food recipes or fashion designs, which do not have intellectual property protection, still thrive and innovate despite the lack of legal monopolies on ideas.