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

firm has purchased the rights to all of them, no new competitors can enter the market.

In some cases, barriers to entry may lead to monopoly. In other cases, they may limit competition to a few

firms. Barriers may block entry even if the firm or firms currently in the market are earning profits. Thus, in

markets with significant barriers to entry, it is notnecessarily true that abnormally high profits will attract new

firms, and that this entry of new firms will eventually cause the price to decline so that surviving firms earn

only a normal level of profit in the long run.

There are five types of monopoly, based on the types of barriers to entry they exploit.

Natural Monopoly

Economies of scale can combine with the size of the market to limit competition. (We introduced this theme in
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