Which of the following is not an exit barrier for firms in an industry?
A)Sunk costs
B)Labor agreements or commitments to purchase raw materials
C)Obligations to input suppliers
D)Excess capacity
E)Government restrictions

Question

Quizplus · Accepted Answer

Excess capacity is not an exit barrier as it does not create any obligation or commitment for the firm. Rather, it is an internal factor that hinders the firm from utilizing its resources efficiently. Sunk costs, labor agreements or raw material commitments, obligations to input suppliers, and government restrictions are all factors that create barriers to exit for firms in an industry.

Which of the Following Is Not an Exit Barrier for Firms