Sources of monopoly power A monopoly, unlike a perfectly competitive firm, has some market power. Thus, it can raise its price, within limits, without quantity demanded falling to zero. The main way monopolies retain their market power is through barriers to entry, which prevent other companies from entering monopolized markets and competing for customers. Consider the market for taxi services. In order to own and operate a taxi, drivers are required to obtain a taxi medallion. Which of the following best explains the barriers to entry that exist in this scenario?
a. Economies of scale
b. Exclusive ownership of a vital resource
c. Legal barriers
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