Ag Decision Maker Activity
Barriers to Entry and Exit
File C5-200
Name
Part I.
Terms
A. Economies of size
B. Capital intensive
C. Intellectual property
D. High switching costs
E. Established brand identity
F. Government regulations and requirements
G. Investment in specialized equipment
H. Specialized skills
I. High fixed costs
Match the above term with the appropriate example/description:
1. ______A new computer company has a difficult time selling its computers due to
competition from well-known and trusted existing companies.
2. ______A new pharmaceutical company has a hard time establishing its business
because they have not patented a new drug and competing pharmaceutical
companies can easily copy its drugs.
3. ______An ethanol company has to invest large amounts of money to build its
processing facility.
4. ______A bio-diesel business has a difficult time obtaining the licenses and
permits needed to start its business because of many governmental regulations
and requirements.
5. ______An ethanol plant has equipment that it is unable to re-sell due to the
uniqueness of the machines.
6. ______A man who runs a repair business for consumer durables like appliances,
yard equipment, electronic equipment, etc., has a hard time finding skilled people
to work for him.
7. ______A new doctor has a difficult time finding patients because patients have
built a personal relationship with their existing doctor.
8. ______Plant and equipment investment make up 60 percent of the cost of
operating a business.
Ag Decision Maker Activity Continued…
Barriers to Entry and Exit
File C5-200
9. ______An ethanol plant can reduce its cost per gallon of ethanol produced
because it does not need to increase the size of its management team of
laboratory staff if it increases the size of its plant, thereby spreading these costs
over more gallons.
Part II.
10. An industry’s product supply changes quickly following a change in demand. This
is an example of:
a.)
b.)
c.)
d.)
An easy to enter but difficult to exit industry
A difficult industry to enter and exit
An easy industry to enter and exit
A difficult to enter but easy to exit industry
11. When an industry is at first profitable but due to intense competition has its profit
margins fall, it is an example of:
a.)
b.)
c.)
d.)
An easy to enter but difficult to exit industry
A difficult industry to enter and exit
An easy industry to enter and exit
A difficult to enter but easy to exit industry
12. An industry has a hard time adapting to change and supply often lags behind
demand. This is an example of:
a.)
b.)
c.)
d.)
An easy to enter but difficult to exit industry
A difficult industry to enter and exit
An easy industry to enter and exit
A difficult to enter but easy to exit industry
13. An industry that has good profitability and limited rivalry is an example of:
a.)
b.)
c.)
d.)
An easy to enter but difficult to exit industry
A difficult industry to enter and exit
An easy industry to enter and exit
A difficult to enter but easy to exit industry
. . . and justice for all
The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national
origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to
all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write
USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or call
202-720-5964.
Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of
Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa.