A Natural Barrier to Entry Is Defined as a Barrier

question 22

Multiple Choice

A natural barrier to entry is defined as a barrier that arises because of

• A) technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.
• B) patents or licenses that exclude others from producing a good or service.
• C) many firms producing the good and thereby allowing choice for all consumers.
• D) anticompetitive practices by a firm that keep other firms from producing.
• E) one firm owning a key natural resource.

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Definitions:

NPVGO

Net Present Value of Growth Opportunities, a measure assessing the value of future investment opportunities of a company.

Growth Opportunities

Prospects or chances a company has to expand its operations, increase sales, and achieve higher profits.

Risk-Adjusted

A process of modifying financial projections or valuations to account for the uncertainty and potential risk involved.

Cost of Equity Capital

The return that investors expect for providing capital to a company, factoring in the risk of equity investments.