Question

Sources of monopoly power

Answer 1

Answer:

In the public water industry - ECONOMIES OF SCALE. It is very expensive to set up a water distribution system, and after it starts to work the costs of keeping it working are very small. So even if a new competitor tries to enter the market, the water company can just lower its prices to make the business unfeasible for the competition.

ALCOA - ACCESS TO SUPPLIERS. Since ALCOA controlled all the supply of bauxite, no company could produce aluminum unless they imported bauxite which would increase their production costs.

Taxis - GOVERNMENT REGULATION. Since taxi licenses (or medallions) are handed out by local governments, it's them that determine how many taxis will offer their services in the city.

Answer 2

Ban-lore In Entry Exclusive Dwnershlp Government- ol' a Key mated Economies Scenarlo Raoul-an Honopollel of Scale In order to own and opelate a taxi, drivers are required to obtain a taxi medallion. ’7 ’3‘ ’7‘ The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component In the production of aluminum. Given that Alcoa did not sell bauxite to any other h h n companlu, Alcoa was a monopolist in the U.5. aluminum industry from the Iatchnineteenth ' century until the 19405. In the natural gas industry, low average total oosls are obtained only through large-scale production. In other words, the initial oost of setting up all the necessary pipes and hoses makes F‘- r‘ ”i“- it risky and, most likely, unprofitable for competitors to enter me market.