Homework (Ch 15) Back to Assignment Attempts: Keep the Highest: 1 1. Sources of

ID: 2441463 • Letter: H

Question

Homework (Ch 15) Back to Assignment Attempts: Keep the Highest: 1 1. Sources of monopoly power A monopolist, unlike a competitive firm, has 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. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Exclusive Ownership Government- of a Key Created Economies Scenario In the natural gas industry, low average total costs are obtained only through large-scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. Monopolies of Scale 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 companies, Alcoa was a monopolist in the U.S. aluminum industry from the late 19th century until the 1940s. In order to own and operate a taxi, drivers are required to obtain a taxi medallion.

Explanation / Answer

Natural gas

Economies of scale

In order to provide consumers at lesser cost, so that others would not be able to compete

ALCOA

Exclusive Ownership of a key resources

Taxi medallion

Government created Monopolies

Government as a agency issues medallion to drivers in order to increase safety and quality