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 Government- Ownership of a Key Resource Created Economies Scenario Monopolies of Scale At the national level, the Federal Communications Commission licenses only a certain number of radio and television stations in each geographic area. 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. 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.

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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
Exclusive
Government-
Ownership of a
Key Resource
Created
Economies
Scenario
Monopolies
of Scale
At the national level, the Federal Communications Commission licenses only a
certain number of radio and television stations in each geographic area.
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.
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.
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 Government- Ownership of a Key Resource Created Economies Scenario Monopolies of Scale At the national level, the Federal Communications Commission licenses only a certain number of radio and television stations in each geographic area. 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. 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.
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