Market entry refers to new firms entering an industry, while market exit refers to existing firms leaving an industry. These decisions are influenced by factors such as profitability, competition, and market conditions.
Think of market entry and exit like players joining or leaving a game. When there's high profit potential and few competitors, more players may enter (market entry). On the other hand, if there's intense competition or declining demand, some players may choose to leave (market exit).
Barriers to Entry: Barriers to entry are obstacles that make it difficult for new firms to enter an industry. Examples include high startup costs or government regulations.
Industry Structure: Industry structure refers to how an industry is organized in terms of number and size of firms, level of competition, and barriers to entry.
Economies of Scale: Economies of scale occur when a firm's average cost decreases as it produces more output. This can create barriers to entry for new firms.
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