Question

Name four barriers to entry and explain what they do to create monopoly power? (Please keep it short)

Answer 1

• Barriers of entry refers to the obstacle or hinderance that prevents excess competition or prevents entry of new firms into the market.
• The four main barriers of entry in a monopoly market are :

1. Exclusive control of physical resources : This is one of the barrier to entry in which a single firm or a monopolist has the sole right to control or use the resources for production. This prevents the other firms from controlling these resources.
2. Patents, copyrights : Both parents and copyrights act as barriers to entry. Patents gives a firm the sole right to produce and sell while the copyright gives a firm the sole right to reproduce or resell. Thus creating a monopoly power.
3. Legal restrictions by the government : The Government limits the number of firms that can operate in each market. It restricts the entry of other firms into a monopoly market to protect the existing single firm from its competitors.
4. Economies of scale : economies of scale is another type of barrier to entry that creates a monopoly power by allowing the existing firm to expand its production as well as decrease the cost of production per unit of output produced.