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 Exclusive Ownership of a Key Government- Created Economies Scenario Monopolies of Scale Resource In the natural gas 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 and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. 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 license to do so. Throughout much of the 20th century, many people viewed South Africa's De Beers Group as a monopoly because it controlled a large percentage of diamond production and sales.
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 Exclusive Ownership of a Key Government- Created Economies Scenario Monopolies of Scale Resource In the natural gas 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 and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. 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 license to do so. Throughout much of the 20th century, many people viewed South Africa's De Beers Group as a monopoly because it controlled a large percentage of diamond production and sales.
Chapter1: Making Economics Decisions
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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
Exclusive
Ownership of
a Key
Government-
Created
Economies
Scenario
Monopolies
of Scale
Resource
In the natural gas 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 and hoses
makes it risky and, most likely, unprofitable for competitors to enter the market.
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
license to do so.
Throughout much of the 20th century, many people viewed South Africa's De Beers Group as a
monopoly because it controlled a large percentage of diamond production and sales.
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