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1. Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Government- Created Monopolies Scenario In an imaginary country, there is only one federally licensed lottery agency in any state; that is, it is impossible for any private firm to start up a competitive lottery Exclusive Ownership of a Key Resource Economies of Scale

1. Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Government- Created Monopolies Scenario In an imaginary country, there is only one federally licensed lottery agency in any state; that is, it is impossible for any private firm to start up a competitive lottery Exclusive Ownership of a Key Resource Economies of Scale

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Monopoly
Section: Chapter Questions
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1. Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Government- Created Monopolies Scenario In an imaginary country, there is only one federally licensed lottery agency in any state; that is, it is impossible for any private firm to start up a competitive lottery without a government licence to do so. In the public water industry, low average total costs are obtained only through large- scale production. In other words, the initial cost of setting up all the necessary pipes makes it risky and, most likely, unprofitable for competitors to enter the market. The Northern Aluminum Company formerly controlled all Canadian sources of bauxite, a key component in the production of aluminum. Given that the Northern Aluminum Company did not sell bauxite to any other companies, the Northern Aluminum Company was a monopolist in the Canadian aluminum industry from the latenineteenth century until the 1950s. Exclusive Ownership of a Key Resource O O Economies of Scale O O
Transcribed Image Text:1. Sources of monopoly power A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Government- Created Monopolies Scenario In an imaginary country, there is only one federally licensed lottery agency in any state; that is, it is impossible for any private firm to start up a competitive lottery without a government licence to do so. In the public water industry, low average total costs are obtained only through large- scale production. In other words, the initial cost of setting up all the necessary pipes makes it risky and, most likely, unprofitable for competitors to enter the market. The Northern Aluminum Company formerly controlled all Canadian sources of bauxite, a key component in the production of aluminum. Given that the Northern Aluminum Company did not sell bauxite to any other companies, the Northern Aluminum Company was a monopolist in the Canadian aluminum industry from the latenineteenth century until the 1950s. Exclusive Ownership of a Key Resource O O Economies of Scale O O
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