explain how a barrier to exit can be a barrier to entrySolut

explain how a barrier to exit can be a barrier to entry?

Solution

We can consider a monopolist who is operating at a large scale.

Such a firm will have huge fixed costs, as well as good access to suppliers and materials/resources. Due to the huge fixed costs, exit is very costly and acts as an exit barrier.

At the same time, the existing firm\'s exit barrier acts as a potential entrant\'s entry barrier. The potential entrant has to bear huge fixed costs to operate at a comparable scale, and he has no access to ready supply of resources. So these act as an entry barrier for him.