1. Barriers to entry A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falli to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopoliz markets and competing for customers. Consider the market for diamonds. Throughout much of the twentieth century, South Africa's De Beers group was viewed as a monopoly, because controlled a large percentage of diamond production and sales. Which of the following best explains the barriers to entry that exist in this scenario? O Control of essential resources O Legal restrictions

1. Barriers to entry A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falli to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopoliz markets and competing for customers. Consider the market for diamonds. Throughout much of the twentieth century, South Africa's De Beers group was viewed as a monopoly, because controlled a large percentage of diamond production and sales. Which of the following best explains the barriers to entry that exist in this scenario? O Control of essential resources O Legal restrictions

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 7PA

See similar textbooks

Similar questions

Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the monopolys product increases dramatically. Draw the new demand me. What happens to the marginal revenue as a result of the increase in demand? What happens to the marginal cost curve? Identify the new profit-maximizing quantity and price. Does the answer make sense to you? Figure 9.6 Illustrating Profits at the HealthPill Monolpoly
Intellectual property laws are intended to promote innovation, but some economists, such as Milton Friedman, have argued that such laws are not desirable. In the United States, there is no intellectual property protection for food recipes or for fashion designs. Considering the state of these two industries, and hearing in mind the discussion of the inefficiency of monopolies, can you think of any reasons why intellectual property laws might hinder innovation in some cases?
What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits?
For many years, the Justice Department has tried to break up large firms like IBM, Microsoft, and most recently Google, on the grounds that their large market share made them essentially monopolies. In a global market, where U.S. films compete with firms from other countries, would this policy make the same sense as it might in a purely domestic context?