1. Sources of monopoly power A monopolist, unlike a competitive firm, has some m
ID: 1215725 • Letter: 1
Question
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.
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.
Barriers to Entr Exclusive Ownership Government of a Key CreatedEconomies Resource Monopolies of Scale Scenario 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. In order to own and operate a taxi, drivers are required to obtain a taxi medallion. The Aluminum Company of America (Alcoa) formerly controlled al U.S sources of bauxite, a key component in the production of alu key component in the production of aminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late- nineteenth century until the 1940sExplanation / Answer
Because a large scale production reduces the average cost, it brings economies of scale. Hence for a public water company select economies of scale
For taxis the requirement of obtaining a licensing is a legal barrier created by the government. Hence select government created monopoly
In the last case the company controls a key resource so select exclusive control over a key resource.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.