Sources of monopoly power

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.

Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario.

Scenario

Barriers to Entry

Exclusive Ownership of a Key Resource

Government$-$Created Monopolies

Economies of Scale

In the natural gas industry, low average total costs are obtained only through large$-$scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market.

The Northern Aluminum Company formerly controlled all Canadian sources of bauxite, a key component in the production of aluminum. Given that the Northern Aluminum Company did not sell bauxite to any other companies, the Northern Aluminum Company was a monopolist in the Canadian aluminum industry from the late nineteenth century until the $1950$s$.$

In order to own and operate a taxi, drivers are required to obtain a taxi licence.