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Choosing an economics degree course

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Production possibilities

Barriers to entry

Some barriers to entry arise naturally in an industry, such as when entry is deterred due to economies of scale and absolute cost advantages

Economies of scale occur when long-run average costs are falling (see Figure 1). A single firm will face lower production costs than if two or more firms produced the same output, creating a barrier to entry.

Barriers to entry arise if an incumbent firm enjoys lower absolute costs of production, maybe gained from its production experience (see Figure 2).

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Previous

Choosing an economics degree course

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Production possibilities

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