Title: Barriers to Entry: Reasons for Monopolies to Exist | Boundless Economics
Headings: Barriers to Entry: Reasons for Monopolies to Exist
Barriers to Entry: Reasons for Monopolies to Exist
Resource Control
Key Points
Key Terms
Economies of Scale and Network Externalities
Key Points
Key Terms
Government Action
Key Points
Key Terms
Monopoly Creation
Government-Granted Monopoly
Government Monopoly
Legal Barriers
Key Points
Key Terms
Copyright
Patent
Government Granted Monopoly
Natural Monopolies
Key Points
Key Terms
Cost Structure
Fixed Costs
Other Barriers to Entry
Key Points
Key Terms
Control Over Natural Resources
High Capital Requirements
Economies of Scale
Network Effects
Legal Barriers
Government Backing

Content: economic rent: The portion of income paid to a factor of production in excess of its opportunity cost. Control over natural resources that are critical to the production of a good is one source of monopoly power. Single ownership over a resource gives the owner of the resource the power to raise the market price of a good over marginal cost without losing customers to competitors. In other words, resource control allows the controller to charge economic rent. This is a classic outcome of imperfectly competitive markets. A classic example of a monopoly based on resource control is De Beers. De Beers Consolidated Mines were founded in 1888 in South Africa as an amalgamation of a number of individual diamond mining operations. De Beers had a monopoly over the production of diamonds for most of the 20th century, and it used its dominant position to manipulate the international diamond market. It convinced independent producers to join its single channel monopoly.