Question

Explain in your own words, the various barriers to entry that are experienced in a monopoly market. Use an example of each barrier in your explanation.

Answer 1

There are two types of monopoly, based on the barriers type for entry they exploit. One is natural monopoly, where the barriers to entry are something other than legal prohibition; and second is legal monopoly, where government prohibit competition. The various barriers to entry that are experienced in a monopoly market are:

-- Government regulation: For few products, the government erects barriers to entry by limiting or prohibiting competition. Under U.S. law, no organization however the U.S. Postal Service is legally permitted to deliver first-class mail.

--Copyright: According to the U.S. Copyright Office, a copyright is a form of protection given by the United States law for ‘original works of authorship’ including musical, architectural, cartographic, literary, dramatic, choreographic, graphic, pantomimic, pictorial, sculptural, and audiovisual creations. No one is permitted to display, reproduce, or perform a copyrighted work without permission of the author. Copyright protection usually lasts for the life of the author plus 70 years

--Ownership or control of a key scarce resource: When a company has control of a scarce physical resource, there is obstacle for other firms to enter. For example: In the U.S. economy, the Aluminum Company of America, also known as ALCOA controlled majority of the supply of bauxite, a key mineral used in production of aluminum, thus other companies were simply unable to produce enough aluminum to compete.

-- Trademark: A trademark refers to an identifying name or symbol for a particular good, like Chevrolet cars, Chiquita bananas, or the Nike "swoosh" that appears on shoes and athletic gear. A firm may renew a trademark over and over again, as long as it is actively using it