4.1.5.6 What are the main barriers to entry protecting monopolists?

EofS, legal barriers, resource ownership, pricing/branding strategies

What are the main barriers to entry protecting monopolists?

EofS

Act as a barrier to entry(large firms have lower AC than new ones)

FC, AC, profit, prices, dominant

Barriers to Entry — EofS(AO3):

Large firms spread __ over large output, but new small firms produce less to have higher __. This decreases the ____ and increases the ____ of new firms, thus existing firms stay _______.

new online retailers unable to compete with Amazon’s EofS(low P, faster delivery)

Barriers to Entry — EofS(AO2)

legal barriers

occur when laws and gov. regulation prevent new firms form entering a market(e.g. patents, copyrights, licenses, exclusive rights)

legally, competition, monopoly, prices, development costs

Barriers to Entry — Legal Barriers(AO3):

One firm _____ allowed to sell a good, which limits __________ and allows the firm to gain _______ power. This leads to higher _____ as the firm recovers __________ ____

Pfizer may hold a patent preventing other firm form producing same medicine

Barriers to Entry — Legal Barriers(AO2):

Resource ownership

When one firm control key inputs needed for production

resources, demand, competition, monopoly, access

Barriers to Entry — Resource Ownership(AO3):

If new firms can’t access these _____ then they can’t enter the market even with high ______. Thus, there is minimal _______, sustained ______ power, and other firm’s ______ is limited.

De Beers, diamond, prices and supply

Barriers to Entry — Resource Ownership(AO2):

_______ historically controlled a large share of the world’s ______ supply allowing them to influence _____ and _______ for many years

Pricing/Branding Strategies

established firms benefit from brand loyalty, meaning customers trust and prefer their products.

demand, competitive, prices

Barriers to Entry — Pricing/Branding Strategies(AO3):

This leads new firms to face low ______ even if prices are _________. Some firms may also use low _____ to discourage entry.

• Branding protects the firm’s market power and limits competition

Coca-Cola

Barriers to Entry — Pricing/Branding Strategies(AO2)