Government restrictions on entry 2 kinds of barriers entry barriers created by governments and structural barriers to entr Governments create entry barriers when they grant exclusive rights (monopoly franchise)to produce to the incumbent and use their monopoly on the legal power of coercion to prevent entry by other firms Government grant exclusive franchises for a number of reasons 1. Natural monopoly. Restricting production to a single firm minimizes production costs 2. Source of revenue. governments grant exclusive production rights to create and share in monopoly profits 3. Redistribution rents The government also uses legal restrictions on entry to create and transfer monopoly profits 4. Intellectual property rights. Exclusive rights to produce are also created through intellectual property rights. Governments grant the creators of new ideas (patents )and new expressions of ideas copyrights)protection from imitation and competition by granting innovators intellectual property rights in their creations the extent to which patents and copyrights translate into market power depends on the existence of substitutesGovernment restrictions on entry • 2 kinds of barriers: entry barriers created by governments and structural barriers to entry. • Governments create entry barriers when they grant exclusive rights (monopoly franchise) to produce to the incumbent and use their monopoly on the legal power of coercion to prevent entry by other firms. • Government grant exclusive franchises for a number of reasons: • 1. Natural monopoly. Restricting production to a single firm minimizes production costs. • 2. Source of revenue. Governments grant exclusive production rights to create and share in monopoly profits. • 3. Redistribution rents. The government also uses legal restrictions on entry to create and transfer monopoly profits. • 4. Intellectual property rights. Exclusive rights to produce are also created through intellectual property rights. Governments grant the creators of new ideas (patents) and new expressions of ideas (copyrights) protection from imitation and competition by granting innovators intellectual property rights in their creations. The extent to which patents and copyrights translate into market power depends on the existence of substitutes