11. Sources of monopoly power A monopoly, unlike a perfectly competitive firm, has some market power. Thus,...

90.2K

Verified Solution

Question

Economics

11. Sources of monopoly power
A monopoly, unlike a perfectly competitive firm, has some marketpower. Thus, it can raise its price, within limits, withoutquantity demanded falling to zero. The main way monopolies retaintheir market power is through barriers to entry, which preventother companies from entering monopolized markets and competing forcustomers.
Consider the market for tanzanite. The mines for thisblue-purple gemstone, found only in Tanzania, are owned by thelocal government. Given that no one is allowed into the mineswithout government permission, the market structure for tanzanitehighly resembles that of a monopoly.
Which of the following best explains the barriers to entry thatexist in this scenario?
a) Legal barriers
b) Increasing returns to scale
c) Control over an important input

Answer & Explanation Solved by verified expert

3.7 Ratings (720 Votes)

Solution A monopoly can raise its price without quantity demanded falling to zero because it is the only option available to the consumers The main way monopolies retain their market power is through barriers to entry which prevent other companies from entering monopolized markets and competing for customers In the market for tanzanite See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member