A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized markets and competing for customers. Consider the market for public water. In this 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 treatment plants makes it risky and most likely unprofitable for a competitor to enter the market. Which of the following best explains the barriers to entry that exist in this scenario? Legal barriers Control over an important input Increasing returns to scale

A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized markets and competing for customers. Consider the market for public water. In this 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 treatment plants makes it risky and most likely unprofitable for a competitor to enter the market. Which of the following best explains the barriers to entry that exist in this scenario? Legal barriers Control over an important input Increasing returns to scale

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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