1. which of the terms below is defined as "anything that keeps new firms from entering an industry in which firms are earning economic profits"?

a. economies of scale
b. game theory
c. oligopoly
d. barriers to entry
2. economies of scale exist when a firm's average costs fall as it output.

a. short-run; decreases
b. long-run; increases
c. long-run; decreases
d. short-run; increases
3. which of the following terms is a barrier to entry?

a. patents
b. economies of scale
c. ownership of a key input
d. all of the above.

1. D. barriers to entry

2. B. long-run; increases 

3. D. All of the above

Explanation:

Anything that keeps new firms from entering an industry in which firms are earning economic profits is known as a barrier to entry.

When an industry have high barriers to entry, it is difficult for new firms to enter into the industry. Therefore, firms in an industry with high barriers to entry would continue to earn economic profit.

A firm earns economic profit where price is greater than average total cost.

An example of an industry with high barriers to entry are monopolies and oligopolies.

Monopolies are industries where there is only one firm operating in the industry.

Oligopolies are industries where there are only few firms operating in the industry.

A monopoly or oligopoly can arise for the following reasons:

1. Economies of scale : in the long run, when total average cost falls as output increases, the firm is said to be experiencing economies of scale. A firm can experience economies of scale because of its large size. The large size of the firm makes the firm enjoy discounts because of bulk buying or they borrow at lower costs because of their large size.

2. Ownership of a key input: A monopoly can arise if the firm owns a key input needed in the production process. Ownership of a key input prevents other firms from entering into the industry as they do not have assess to the input.

3. Patents: Patents are rights given to an inventor to prevent others from using, selling or making their invention for a period of time. When a firm makes an invention and gets a patent, it prevents other firms from entering into the industry and therefore the firm with the patent can function as a monopoly for the duration where the patent is effective.

At the other end of the spectrum is a perfect competition where there are no barriers to entry or exit of firms into the industry. Therefore, there are many sellers in the industry and the firms do not earn economic profit in the long run.

I hope my answer helps you.

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