Question

A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling to zero. 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. Consider the market for electronics. Patents are granted to inventors of products or processes for a certain number of years to encourage innovation. Without patents, research and development needed to improve electronics are unlikely to occur, as nothing would then prevent other firms from stealing ideas and copying products.Which of the following best explains the barriers to entry that exist in this scenario?a. Control over an important inputb. Legal barriersc. Increasing returns to scale

Answer 1

a monopolly unlike a perfectly competitive firm has some market power.