Barrier to Entry - Unit 9

Barrier to Entry

Answer explanation

Any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms

Patent

Answer explanation

A legal barrier to entry that grants its holder the exclusive right to sell a product for 20 years from the date the patent application is filed. (Pharmaceuticals)

Innovation

Answer explanation

The process of turning an innovation into a marketable product

Economies of Scale

Answer explanation

Sometimes a monopoly occurs when a firm experiences _____________, as reflected by a downward sloping, long run average cost curve

De Beers

Answer explanation

Company that coined the term "Diamonds are Forever", and completely controlled the diamond market in the world - had a monopoly on the market

Price Maker

Answer explanation

A firm that must find the profit maximizing price when the demand curve for its output slopes downward (Graph associated: Monopoly)

Deadweight Loss of Monopoly

Answer explanation

Net loss to society when a firm uses its market power to restrict output and increase price (Graph associated: Losses from monopoly)

Rent Seeking

Answer explanation

Activities undertaken by individuals or firms to influence public policy in a way that will increase their incomes (Lobbying)

Price Discriminaiton

Answer explanation

Increasing profit by charging different groups of consumers' different prices when the price differences are not justified by differences in cost.

US Postal Service

Answer explanation

Example of a monopoly: