Attempts: Average: 1 1. Sources of monopoly power Aa Aa A monopoly, unlike a per

Question

Attempts: Average: 1 1. Sources of monopoly power Aa Aa A monopoly, unlike a perfectly competitive firm, assumes some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry-that is, other companies cannot enter the market to create competition in that particular industry. Consider the market for aluminum. The Aluminum Company of America (Alcoa) used to control all U.S. sources of bauxite, a key ingredient in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late-nineteenth century until the 1940s. Which of the following best explains the barriers to entry that exist in this scenario? O Government-created monopolies O Exclusive ownership of a key resource O Economies of scale

Explanation / Answer

Option 2 is correct

Alcoa had the exclusive ownership of a key resource which enabled it to command a monopoly in the US aluminium industry.

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