Question

Monopolies exist because of barriers to entry, obstacles that prevent other firms from entering an industry and competing for market share. For each case below, indicate which barrier to entry applies. a. Coca-Cola's vast market share in the soft drink market: - Control of a resource - Legal barrier - Network externalities - Economies of scale - Brand loyalty

Answer 1

Coca-Cola's monopoly in the soft drink market is largely due to economies of scale and brand loyalty, which serve as significant barriers to new competitors.

Step-by-step explanation:

Monopolies are known to exist largely due to various kinds of barriers to entry, which can prevent or discourage potential competitors from entering a market and challenging existing firms. When it comes to Coca-Cola's vast market share in the soft drink market, several barriers to entry might apply, but the predominant ones are likely economies of scale and brand loyalty.

Coca-Cola benefits from significant economies of scale, meaning it can produce at a lower average cost due to its large scale of operation. Additionally, Coca-Cola has built up considerable brand loyalty over the years, making it difficult for new entrants to compete against the established brand association and consumer preferences enjoyed by Coca-Cola.