Firms attempting to enter a monopoly market must overcome barriers to entry - Leaving Cert Economics - Question 4 - 2007
Question 4
Firms attempting to enter a monopoly market must overcome barriers to entry. Outline THREE such barriers to entry.
(i)
(ii)
(iii)
Worked Solution & Example Answer:Firms attempting to enter a monopoly market must overcome barriers to entry - Leaving Cert Economics - Question 4 - 2007
Step 1
Legal / Statutory / Government Monopoly:
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Answer
A government can create a monopoly by granting a firm the exclusive right to supply a good or service. This legislative power enables the monopolist to operate without competition, effectively blocking any potential entrants into the market.
Step 2
Ownership of a Patent / Copyright:
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Answer
A firm may hold a patent or copyright that gives it exclusive rights over a product or process. This legal protection prevents other firms from producing or selling similar goods, deterring entry into the market.
Step 3
Large Capital Investment:
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Answer
The significant financial resources required to start and maintain operations in certain markets can be a barrier to entry. High initial costs discourage new competitors, as they may find it challenging to secure the necessary funding to establish themselves.
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