Definition: Are barriers which prevent a firm from leaving an industry quickly and at little cost.
In most industries, barriers to exit are low. Barriers to exit include the cost and time of making employees redundant, selling premises and stock or notifying customers and suppliers. Barriers to exit increase when employment laws make it more difficult to make staff redundant. However, there may be other barriers to exit. A firm may be locked into a contract to supply another firm which, if it breaks, it will have to pay a large penalty. Or it may have leased premises where the individual owner has to continue paying the lease even if the business is closed down. In these circumstances, the firm may make a smaller loss by staying in the industry than by closing it.
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