Question

Which factor can act as a barrier to entry in an oligopolistic industry?

Options

• Free and easy access to the market for all firms

• Low capital requirement and weak brands

• Strong brand loyalty and high capital needs

• Perfect knowledge and identical small firms

Answer 1

Strong brand loyalty and high capital needs

Explanation: 

New firms find entry difficult because existing firms enjoy strong brand loyalty, hold licences or patents, and require large capital and scale, which act as barriers to entry.