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Which conditions may give in to the rise of a monopoly?

Question:

Which conditions may give in to the rise of a monopoly?

Barriers to Entry:

A barrier to entry is any factor that prevents new firms from entering a market. The stronger the barrier, the more difficult it is for new firms to enter.

Answer and Explanation:

Monopolies arise when the barriers to entry are so strong that NO other firms can enter the market. This can occur if the firm has sole control of some resource or exclusive rights to some piece of information (which can be provided by patents). Firms can also have exclusive rights to operate by the government (for example, the U.S. Postal Service). It may also be the case that fixed or startup costs are so high that no firms can enter the market and compete with the existing firms because of the high economies of scale.


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Barriers to Entry in Economics: Definition, Types & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 23
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