What Is a Barrier to Entry?

Why do monopolies exist? Many textbooks point to barriers to entry as a cause of monopolies.

Tyler Cowen and Alex Tabarrok’s textbook says: “In addition to patents, government regulation and economies of scale, monopolies may be created whenever there is a significant barrier to entry, something that raises the cost to new firms of entering the industry.” Greg Mankiw’s textbook goes as far as to say: “The fundamental cause of monopoly is barriers to entry.

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