State and explain three barriers to entry facing entrants to a monopoly market

Three barriers to entry to a monopoly market:

1. Legal / Statutory Monopoly
Other firms may not be allowed into the industry because the government confers on a firm the sole right to supply a particular good or service..
2. Ownership of a patent / copyright
If a firm has the sole right to a manufacturing process then no other firm can compete with it – other firms are not allowed to use this patent until the time period for it has expired.
3. Ownership of raw materials
A firm may have complete control over the source of essential raw materials i.e. an oil drilling or mining company.
4. Large capital investment
• In some industries the minimum size of a firm required to operate efficiently is so large that there is no room for competitors once one firm has established itself.
• Competitors are discouraged from entering because of the high initial start-up costs.
5. Trade agreements /collusion/cartels
By entering trade agreements with other firms, a firm can share out the market so that no competition exists within its segment of the market.
6. Mergers / takeovers
A firm may ensure its survival by merging / taking over other rival firms in the same line of business, such that it becomes a monopoly and no competition exists within the industry.
7. Monopolies based on fear, force or threats
An individual / firm may stop other individuals/firms providing similar goods/services by means of threats/force /instilling fear into potential entrants i.e. the supply of illegal drugs.
8. Brand proliferation
A firm may gain monopoly power if, through its advertising, consumers are convinced that there is no suitable alternative to its particular brands.



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