The low exit and high entry barriers can be found in industries which have
a. Low and stable returns
b. Low but risky returns
c. High and stable returns
d. High but risky returns
e. None of the above
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The best answer to this is C. Markets with low exit barriers and high entry barriers tend to have high profit margins that are relatively stable.
Because of the high barriers to entry, markets like this have relatively few competitors. This is because it is difficult to enter the market, so few firms do so. Less competition tends to mean that there will be higher profit margins.
Because of the low barriers to exit, the margins should be relatively stable. This is because low exit barriers (like high entry barriers) tend to create a situation where the market is not crowded with competitors. This makes profits much less volatile.
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