Which of the following is NOT one of the sources of natural market power?

• A. Control of a key resource
• B. Network effects
• C. Economies of scale
• D. Government regulation

Answer: (D)

Verified step by step guidance

1. Understand the concept of natural market power: it arises when a firm can maintain a dominant position in the market due to inherent characteristics of the market or production process, rather than through external interventions.
2. Identify common sources of natural market power: these typically include control of a key resource, network effects, and economies of scale, all of which create barriers to entry or advantages that allow a firm to dominate naturally.
3. Analyze each option given: 'Control of a key resource' means owning or controlling essential inputs that others cannot easily access; 'Network effects' occur when the value of a product increases as more people use it; 'Economies of scale' refer to cost advantages from producing at a larger scale.
4. Recognize that 'Government regulation' is not a natural source of market power because it involves external legal or policy actions that grant or restrict market power, rather than arising from the market or production characteristics themselves.
5. Conclude that the correct answer is the option that does not represent a natural source of market power, which is 'Government regulation'.