Different structural mechanisms create barriers to entry in imperfect market structures. Relate each specific entry barrier listed on the left with the economic circumstance that generates it on the right.
- Statutory GrantA government decree granting exclusive operational rights or patent protection to a single enterprise.
- Control of Key ResourceExclusive ownership of a critical raw material required for the production of a commodity.
- Natural Scale AdvantageA cost structure characterized by continuously declining long-run average total cost over the entire market demand.
- Technological SecretExclusive possession of a specialized production technique or trade secret that rivals cannot replicate.
Answer
Statutory Grant pairs with government decrees or patents; Control of Key Resource pairs with exclusive ownership of raw materials; Natural Scale Advantage pairs with continuously declining long-run average costs; Technological Secret pairs with exclusive possession of un-replicated production techniques.
Each monopoly source relies on a distinct barrier to entry. Statutory grants stem from legal protections like patents or state licenses. Resource control relies on exclusive ownership of vital inputs. Natural scale advantages arise when high fixed costs produce continuous economies of scale. Technological secrets rely on proprietary technical processes.
Step-by-Step Solution
Key Concept
Sources of Monopoly Power and Barriers to Entry