There are no barriers to entry in a perfectly competitive market.
In a perfect world with perfectly competitive markets, there should be no barriers to entry and exit. In the real world, several factors may hinder a budding entrepreneur from starting a business and reaping profits. Such barriers to market entry mean that some companies are able to enjoy large profits year after year, although, in perfect markets, anyone would be able to start a business and earn a slice of that profit.
Legal Barriers
Legal barriers aim to protect consumers and businesses.
Copyright and licenses constitute an important barrier to entry. You cannot start a medical practice without a license, nor can you start selling Microsoft Windows CDs on the street, even when you can make cheaper copies in your garage. These legal barriers are created by the government to protect consumers and businesses.
Access to Capital
Capital markets make access to capital easier.
Wanting to start a business is one thing, obtaining the capital required is quite another. Access to capital is a major barrier to market entry. There are capital markets (think of Wall Street and all the banks of the world) that should, in theory, be willing to lend to finance a profitable plan. In practice, however, access is limited by many factors such as reputation, and the costs of ensuring that the entrepreneur follows through once they receive the capital.
Trde Policy:
Governments often erect trade barriers.
Many countries erect trade barriers to prevent, or at least make it difficult, for foreigners to do business in their country. Such protectionist policies may cause retaliations by other countries and lead to a trade war.
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