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Economies of scale is the major barrier. This occurs where the lowest unit cost and, therefore, low unit prices for consumers depend on the existence of a small number of large firms, or in the case of monopoly, only one firm. Because a very large firm with a large market share is most efficient, new firms cannot afford to start up in industries with economies of scale. Public utilities are known as natural monopolies because they have economies of scale in the extreme case. More than one firm would be inefficient because the maze of pipes or wires that would result if there were competition among water companies or cable companies. Legal barriers also exist in the form of patents and licenses, such as radio and TV stations. Ownership or control of essential resources is another barrier to entry, such as the professional sports leagues that control player contracts and leases on major city stadiums. It has to be noted that barrier is rarely complete. Think about the telephone companies a couple decades ago; there was no substitute for the telephone. Nowadays, cellular phones are very popular. It creates a substitute for your house phone, causing the traditional telephone companies to lose their monopoly position.
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