The existence of exit barriers tends to delay the closing of inefficient firms that face international competitive disadvantages.

Question

Quizplus · Accepted Answer

Exit barriers, such as high fixed costs, contractual agreements, or government regulations, make it difficult for firms to exit the market. This delay in exit can lead to the persistence of inefficient firms that cannot compete with foreign competitors, ultimately hindering the growth of the economy.

The Existence of Exit Barriers Tends to Delay the Closing