a) Why do barriers to entry create market power ? 5mqarks b) Michelle\'s busines

Question

a) Why do barriers to entry create market power ? 5mqarks

b) Michelle's business produces ceramic cups using labor,clay and kiln. she produces cups using a fixed propotion of labor and clay , but regardless of how many cups she produces she uses only one kiln. she can manufacture 25 cups a day with one worker and 35 with two worker

i) Does her production process illustrate decreasing to scale or a dinishing marginal product of labor? 2 marks

ii) what is the likely eplaination for why output doesnt increase protortionalely with the number of workers?3 marks

c) Can a firm experience deminishing returns in the long run? . Give an explaintion . 5 marks

d) Explain why a profit maximizing momooplist would never produce at an output level ( and charge a price) that correspond o the inelastic portion of the market demand curve. 5 marks  

Explanation / Answer

a) The barriers to entry create market power because its reduces the competition of existing firm in the market . barriers to entry gives monopolies market power in a way that, if their is a barrier on entry, then no new firms will enter into market , hence the competition will not increase or there will be no competition, so a monopoly can choose his price according to its profit maximation output or on the basis of their average total cost .thus monopoly gain the market power or the existing firm acts as a monopoly. they can choose thier price . hence they become the price maker.

B) please upload it again. its against chegg policy.

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