The fundamental source of monopoly power is

Question

BlackTom AI · Accepted Answer

The question asks for the fundamental source of monopoly power and, according to the provided answer, the correct choice is barriers to entry.

First, consider what barriers to entry do: they impede new firms from entering the market, which limits competition. When new entrants are deterred or prevented, the incumbent firm can maintain prices above competitive levels and enjoy sustained profits, since market forces cannot easily erode its position. This is the core mechanism by which a monopoly sustains power over price and output.

Even without the listed options, this reasoning highlights why barriers to entry are central to monopoly power. If new competitors cannot enter, the monopolist faces little or no threat to raised prices or restricted supply, reinforcing market dominance over time.

That said, several other factors can contribute to monopoly power, though they are not universally the fundamental source in all cases. For example:
- Control of a critical resource or input can grant a monopoly if no substitutes exist.
- Legal or regulatory barriers, such as exclusive licenses or patents, can create protected markets.
- Natural monopolies arise when a single provider is more efficient due to economies of scale across the entire market.
- Network effects or proprietary technology can lock in customers and deter competitors.
- Strategic actions like exclusive contracts or brand loyalty can also reduce competitive pressure.

However, when you ask for the fundamental source, barriers to entry are typically cited as the primary reason a monopolist can sustain market power, because they directly prevent competition from arising and erode the competitive constraint that would otherwise cap prices and output.

In summary, barriers to entry explain why a single firm can maintain market power in the face of potential competitors, which is why they are identified as the fundamental source of monopoly power.

The fundamental source of monopoly power is

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Government licensing is not a barrier to entry.

Which of the following is considered a barrier to entry into an industry?

As an example of Blank ______, the Federal Communications Commission licenses only so many radio and television stations in each geographic area.

Slashing prices is an example of an entry barrier created by a(n) .

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