Before we begin a detailed discussion of entry barriers let's examine the consequences of entry from the point of view of a profit maximizing monopolist.

    Suppose the monopolist whose data are depicted to the right is maximizing profits (green shaded area) by producing output Q* and selling at price P*. How would this firm be affected if one or more new firms entered the same industry and began selling a product that was a close substitute for this monopolist output.

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