Principles of Management CLEP Practice Exam 2026 - Free Management Practice Questions and Study Guide

Entry barriers are obstacles that make it difficult for new competitors to enter a market. When we consider the role of entry barriers in a competitive landscape, the statement that they can protect established firms from competition is accurate.

Established firms that have already overcome these barriers often benefit from reduced competitive pressure, allowing them to maintain their market share, set prices, and enjoy higher profits without the immediate threat of new entrants disrupting the market dynamic. High entry barriers, such as substantial capital requirements, economies of scale, proprietary technology, or brand loyalty, create a protective cushion for existing businesses.

In contrast, the other statements reflect misunderstandings about entry barriers. For instance, they do not exclusively benefit new entrants, as these barriers serve primarily to shield established firms. Furthermore, while some entry barriers may be related to government regulations, many arise from industry conditions and competitive practices that are not dictated by government. Lastly, entry barriers can influence market prices because fewer competitors can lead to higher prices, as established firms have less pressure to lower their prices to compete with new entrants.