condition that needs to be satisfied but this is just the starting point. Without barriers to entries, above normal profits experienced by monopolists would not persist as other sellers of homogenous or similar goods would continue to enter the industry until above normal profits are diminished until the industry experiences perfect competition There are several sources of market power including: High barriers to entry. These barriers include the control of scarce resources, increasing returns to scale, technological superiority and government created barriers to entry. OPEC is an example of an organization that has market power due to control over scarce resources — oil. Increasing returns to scale. Firms that experience increasing returns to scale also experience decreasing average total costs and therefore become more profitable with size and higher demand levels. High start-up costs. This barrier makes it difficult for new entrants to succeed as the initial creation costs are ingrained within the industry. Firms like power, cable television and telecommunication companies fall within this category. A firm seeking to enter such industries require the ability to spend millions of dollars before starting operations and generating revenue. Brand loyalty of consumers and value placed by consumers on reputation. Incumbent firms often have a competitive advantage over new entrants as customers are familiar with the product and service. An incumbent firm can engage in several entry-deterring strategies such as limit pricing, predatory pricing and strategic bundling. Microsoft has substantial pricing or market power due to technological superiority in its design and production processes. Government policies/regulations. A prime example are patents granted to pharmaceutical companies which prevent competitors from creating and selling their specific goods. These patents give the drug companies a virtual monopoly in the protected product for the term of the patent. Measurement of market power Measuring market power is inherently complex because the most widely used measures are sensitive to the definition of a market and the range of analysis. Magnitude of a firm's market power is shown by a firm's ability to deviate from an elastic demand curve and charge a higher price (P) above its marginal cost (C), commonly referred to as a firm's mark-up or margin. The higher a firm's mark-up, the larger the magnitude of power. This said, markups are complicated to measure as they are reliant on a firm's marginal costs and as a result, concentration ratios are the more common measures as they