Answer to Question #25303 in Macroeconomics for Jimmy Vo

Question

Do you have an example of a monopoly? If so, what are the barriers to entry?

Answer 1

One type of barriers to entry is product differentiation. In this case, the buyer has come to identify the brand name of the firm with the product. Examples of this would be Kleenex and Jello. Nobody asks you for a paper tissue, they request a Kleenex. Similarly, you would not ask for a bowl of flavored gelatin for dessert, but instead would request a bowl of Jello. In markets where significant product differentiation exists, it is very difficult for new firms to enter. Potential entrants somehow have to overcome the consumers' natural inclination to identify a seller's brand name with the product, and that will not be very easy.