Question

A monopolist, unlike a competitive firm, has some market power. It can raise its price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry—that is, other companies cannot enter the market to create competition in that particular industry.In the following case, indicate which barrier to entry appropriately explains why a monopoly exists in each scenario.

The Aluminum Company of America (Alcoa) formerly controlled all U.S. sources of bauxite, a key component in the production of aluminum. Given that Alcoa did not sell bauxite to any other companies, Alcoa was a monopolist in the U.S. aluminum industry from the late 19th century until the 1940s.

Answer 1

1).Owing to the fact a large scale production reduces the average cost, and brings economies of scale. Thus, for a public water company select economies of scale

2).In cases of taxis the requirement of getting a licensing is a legal barrier instituted by the government. Thus select government created monopoly

3).For the final case the company controls a key resource so exclusive control over a key resource should be selected