Question

Name and define at least three barriers to entry used by monopolies or oligopolies and give a real-world example of each.

Answer 1

The monopoly firms have different barriers to trade and they are

• The key resource is owned by a company , so no other firm can make it into the market. The Debeers company had a monopoly power through this , in the 1960's they controlled almost 80% of the diamond production. And now the case is different the percentage is 35 now.
• Another barrier is the economies of scale, that is the lower average cost enjoyed by the firm when the produce. This is the cost advantages enjoyed them gives the monopoly power for example the Google, this is giant company so competing with company requires huge funding and the initial costs act as barrier to entry.
• The government created monopolies- The government can give the exclusive right to produce a particular product. Eg: Astro; a malaysian company