Explanation It is difficult for a business firm to enter the market and it makes them unprofitable. This is the reason why the monopoly firm exists. By definition, no longer a firm can be monopolist if new business can easily enter the market. By barriers to entry, monopoly power can be maintained which includes: Economies of scale: the production costs will fall down as the scale of business increases. Existing business becomes larger as the output produced in greater volume. They will have cost advantage over new entrants and this in turn discourages new incomers. Second is regarding the competition or limiting price. The existing business firms will set a lower price than the average cost of new entrants and they will make a loss if the new incomers reach to this price. Control over a scarce resource: the existing scarce source will be under the control of the existing firms. It will make difficulty for the new entrants to use this resource. It deters the new firms as the monopolies own the infrastructure and the investments will be so high. For example the British Telecom deters the entry of other firms from entering the market of cables networks...

12th Edition

ISBN: 9781305176386

Author: Snyder

Publisher: YUZU

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Question

Chapter 11, Problem 2RQ

To determine

in a monopoly business, barrier to entry is crucial to the success and all profits of monopoly show up a returns to the factors that provide the barrier to entry is to be explained.

Expert Solution & Answer

Chapter 11 Solutions

EBK INTERMEDIATE MICROECONOMICS AND ITS

Ch. 11.2 - Prob. 1TTA Ch. 11.2 - Prob. 2TTA Ch. 11.2 - Prob. 1MQ Ch. 11.2 - Prob. 2MQ Ch. 11.2 - Prob. 1.1MQ Ch. 11.2 - Prob. 2.1MQ Ch. 11.3 - Prob. 1MQ Ch. 11.3 - Prob. 1TTA Ch. 11.3 - Prob. 2TTA Ch. 11.4 - Prob. 1TTA

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