explain five sources of monopoly power

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Answer :- Following are the five sources of monopoly :-

(1) Government license for franchise :- sometimes government or local authorities give certain right of production to firms in particular areas. There may be rules and regulations for operation by firms in that area. Entry of more than one firm would be harmful.

(2) Patents :- patents gives some exclusive previliages to firm that no other firm can produce same goods which are identical to each other. It can be harmful as well as beneficial for market because it give rise to monopoly power. Due to patents some of the new invention may not take place in the market.

(3) Economies of scale :- when LAC is downward sloping there is need to have only one firm for production in the market. As having more than one producer will make production more costly.

(4) Exclusive control over essential inputs :- Major control over some necessary inputs will make some company monopoly in the market. Due to lack of essential inputs no company would enter into the market.

(5) Network economics :- when fraction of consumers owning certain product reaches critical threshold. Network economy may occur that is economies of scale it occurs due to natural monopoly or monopoly .

Rahul Sunny answered 2 years ago

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explain five sources of monopoly power

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