A monopoly, unlike a perfectly competitive firm, assumes some market power. It c

Question

A monopoly, unlike a perfectly competitive firm, assumes 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. Consider the market for computer technology. Patents are granted to inventors of a product or process for a certain number of years to encourage innovation. Without the patents, the research and development to improve computer technology is unlikely to take place, because nothing prevents other firms from stealing the idea, copying the product, and producing it. Which of the following best explains the barriers to entry that exist in this scenario? Legal restrictions Economies of scale Control of an essential resource

Explanation / Answer

Ans: Legal Restrictions

Explanation: Because patent is a legal restriction. It creates barrier to entry

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