• Distinguish between a natural monopoly and a legal monopoly.

• Explain how economies of scale and the control of natural resources led to the necessary formation of legal

monopolies

• Analyze the importance of trademarks and patents in promoting innovation

•

Identify examples of predatory pricing

Because of the lack of competition, monopolies tend to earn significant economic profits. These profits should

attract vigorous competition as we described in Perfect Competition, and yet, because of one particular

characteristic of monopoly, they do not. Barriers to entry are the legal, technological, or market forces that

discourage or prevent potential competitors from entering a market. Barriers to entry can range from the

simple and easily surmountable, such as the cost of renting retail space, to the extremely restrictive. For

example, there are a finite number of radio frequencies available for broadcasting. Once an entrepreneur or
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