Final answer:
Economies of scale are the source of market power due to falling long-run average total cost, as they can lead to a natural monopoly where new firms face a cost disadvantage.
Option 'b' is the correct.
Step-by-step explanation:
The source of market power due to falling long-run average total cost is economies of scale. This occurs when a company's production increases and the cost of producing each additional unit decreases.
When a company experiences economies of scale over a range of output large enough to supply the entire market, it can lead to a situation called a natural monopoly. In such a case, any new firm attempting to enter the market would face a cost disadvantage, as it would not operate at the same level of output and therefore could not achieve the same low costs per unit.
Other barriers to entry include legal restrictions, like patent rights and copyrights, which give companies exclusive rights to produce certain products or use certain information. These intellectual property laws are designed to protect the investments made by companies in innovation and creative works. Similarly, trade barriers also protect domestic firms from foreign competition by making it more expensive or difficult for foreign goods to be sold in the domestic market. Moreover, actions such as predatory pricing and brand loyalty can act as additional barriers to entry.
Therefore, among the options provided, the answer is B) economies of scale, as they directly relate to the concept of falling long-run average total cost and the formation of natural monopolies, impeding new entrants from competing effectively in the market.