What mistakes do students make with Barriers to entry?

Assuming barriers to entry only affect new firms. They also protect incumbent firms by reducing the threat of competition and safeguarding market share. Confusing barriers to entry with barriers to exit. Barriers to entry prevent firms from joining a market, whereas barriers to exit prevent them from leaving. Believing that monopolies always have absolute barriers to entry. Barriers can be high but not insurmountable, and technological changes can lower them over time.

What are the exam tips for Barriers to entry in Economics B Pearson Edexcel A-Level?

When analysing market structure, always explicitly link the level of barriers to entry to the number of firms and the degree of competition. Use specific examples of barriers, such as legal patents or structural economies of scale, to justify why a market is an oligopoly or monopoly. Remember that in multiple-choice questions, the defining characteristic separating monopolistic competition from oligopoly is often the height of the barriers to entry.

Pearson Edexcel · A-Level · Economics B

Course version: 9EB0 · Version from Sept 2015

Barriers to entry: c) The impact of barriers to entry on market structure

Barriers to entry are obstacles making it difficult for new firms to enter a market.

Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on 10 November 2026.

Point 3 of 4
2 key terms

Study notes

From the checked teaching notes for this specification point.

The idea

What earns the marks

Identify how high barriers to entry lead to concentrated market structures like monopoly or oligopoly.
Explain that low barriers to entry facilitate highly competitive markets such as perfect or monopolistic competition.
Recognise that barriers to entry protect incumbent firms from new competition, allowing them to maintain supernormal profits in the long run.
Evaluate how changes in barriers to entry can shift a market from a monopoly towards a more competitive structure.

Common mistakes and how to put them right

Assuming barriers to entry only affect new firms.
Put it right: They also protect incumbent firms by reducing the threat of competition and safeguarding market share.
Confusing barriers to entry with barriers to exit.
Put it right: Barriers to entry prevent firms from joining a market, whereas barriers to exit prevent them from leaving.
Believing that monopolies always have absolute barriers to entry.
Put it right: Barriers can be high but not insurmountable, and technological changes can lower them over time.

Exam tips

When analysing market structure, always explicitly link the level of barriers to entry to the number of firms and the degree of competition.
Use specific examples of barriers, such as legal patents or structural economies of scale, to justify why a market is an oligopoly or monopoly.
Remember that in multiple-choice questions, the defining characteristic separating monopolistic competition from oligopoly is often the height of the barriers to entry.

Try the lesson

The start of the Barriers to entry: c) The impact of barriers to entry on market structure lesson, made from checked teaching notes for this specification point.

Have a go first

What is the most likely impact of high barriers to entry on the structure of a market?

Tip: press 1 to 4 to choose

Listen

Barriers to entry are obstacles making it difficult for new firms to enter a market. Their presence directly determines market structure. High barriers, such as significant capital requirements or patents, restrict competition and lead to concentrated structures like oligopolies or monopolies. For example, the pharmaceutical industry requires massive R&D investment, creating an oligopoly. Conversely, low barriers allow new firms to easily join the market, resulting in highly competitive structures such as perfect or monopolistic competition. When barriers are low, supernormal profits attract new entrants, which increases supply, drives down prices, and dilutes market concentration over time, preventing long-term monopoly power. A strong answer earns marks for these points. Identify how high barriers to entry lead to concentrated market structures like monopoly or oligopoly. Explain that low barriers to entry facilitate highly competitive markets such as perfect or monopolistic competition. Recognise that barriers to entry protect incumbent firms from new competition, allowing them to maintain supernormal profits in the long run. Evaluate how changes in barriers to entry can shift a market from a monopoly towards a more competitive structure. A common slip: Assuming barriers to entry only affect new firms. Instead, they also protect incumbent firms by reducing the threat of competition and safeguarding market share. Exam tip: When analysing market structure, always explicitly link the level of barriers to entry to the number of firms and the degree of competition.

See it

A top-down flowchart starting from a single node labelled 'Barriers to entry', which splits into two branches. The left branch is 'High barriers', which leads to 'Restrict competition', then to 'Concentrated structures: oligopoly or monopoly'; 'High barriers' also leads to 'Protect incumbent firms', then to 'Supernormal profits maintained in the long run'. The right branch is 'Low barriers', which leads to 'New firms easily join', then to 'Highly competitive structures: perfect or monopolistic competition'; 'New firms easily join' also leads to 'New entrants increase supply, driving down prices and diluting concentration'. — It shows how high barriers to entry lead to concentrated market structures and protected incumbent profits, while low barriers lead to competitive structures and new entry that dilutes concentration.

Key words

Say what each word means before you turn the card.

Market structure

Try answering aloud or in your head before turning the card.

Monopoly power

Try answering aloud or in your head before turning the card.

See every definition

Market structure: The organisation of a market, determined by the presence of barriers to entry, ranging from concentrated forms like oligopolies or monopolies to highly competitive forms such as perfect or monopolistic competition.
Monopoly power: A position held by incumbent firms protected from new competition by barriers to entry, allowing them to maintain supernormal profits in the long run.

Label the diagram

Some boxes have lost their names. Pick the right name for each number.

The diagram again, with 3 boxes numbered instead of named. A top-down flowchart starting from a single node labelled 'Barriers to entry', which splits into two branches. The left branch is 'High barriers', which leads to 'Restrict competition', then to 'Concentrated structures: oligopoly or monopoly'; 'High barriers' also leads to 'Protect incumbent firms', then to 'Supernormal profits maintained in the long run'. The right branch is 'Low barriers', which leads to 'New firms easily join', then to 'Highly competitive structures: perfect or monopolistic competition'; 'New firms easily join' also leads to 'New entrants increase supply, driving down prices and diluting concentration'.

1Box 1
2Box 2
3Box 3

0 of 3 labelled

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