A monopoly can arise when
A) there are diseconomies of scale.
B) there are barriers to entry and no close substitutes for the good being produced.
C) a firm cannot price discriminate.
D) firms engage in rent seeking.
E) a firm must set MR equal to MC in order to maximize its profit.

Question

Quizplus · Accepted Answer

A monopoly arises when a single firm is the sole producer of a good or service for which there are no close substitutes, and when there are significant barriers to entry that prevent other firms from entering the market and competing with the incumbent firm. These barriers to entry can take many forms, including high startup costs, exclusive access to key inputs, patents or other legal protections, or network effects. If there are no close substitutes and no effective competition, the monopoly firm has considerable market power and can potentially earn above-normal profits in the long run.

A Monopoly Can Arise When