What are the sources of a monopoly? Can the government creates a monopoly?

Expert Solution

The main sources of monopoly power are as follows.

(i) Access to critical inputs

A firm that has easy and cheaper access to its critical inputs have a supply chain advantage to other firms, therefore becoming a monopoly.

(ii) Exclusive supply chain networking

If a firm can effectively establish an exclusive network with its supplier(s), it can achieve monopoly power.

(iii) Economies of scale

A firm that is able to achieve economies of scale as it expands output, has a cost advantage over other firms, leading to a monopoly power.

(iv) Branding

Branding acts as a barrier of entry in a market where the brand image of existing firm is so strong that other firms cannot work profitably in the market, therefore they either do not enter the market, or exit after making losses.

(v) Regulations

In case government grants monopoly power, the firm gets monopoly status.

If a firm can achieve monopoly power using cost advantage, it becomes a natural monopoly. However, if government grants monopoly status to a firm, it works as monopolist since other firms are not allowed to enter that regulated industry as per government regulations.

Rahul Sunny answered 1 year ago

In what ways can a government create a monopoly? Why might a government do this?

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

How can the government regulate monopoly firms; what are the advantages and disadvantages of each governmental...

How can the government regulate monopoly firms; what are the advantages and disadvantages of each governmental regulation?

A monopoly creates a deadweight loss because the monopoly sets a price that is too low....

A monopoly creates a deadweight loss because the monopoly sets a price that is too low. makes a normal profit. does not maximize profit. produces less than the efficient quantity. produces more than the efficient quantity. 2. A ________ can price discriminate if, in part, it ________. natural monopoly; is the only seller of a good or service monopoly; can prevent resales of its product monopoly; is the only seller of a good or service perfectly competitive firm; can sell...

explain five sources of monopoly power

what are the major components of government outlays? What are the major sources of government revenues?...

what are the major components of government outlays? What are the major sources of government revenues? Explain how fiscal policy affects the overall economic activity.

Case Monopoly power and competition policy We have seen that a monopoly creates a social loss...

Case Monopoly power and competition policy We have seen that a monopoly creates a social loss compared to a perfectly competitive market. If it is possible to increase the level of competition in a monopolized market, then society is better off since social surplus increases. Competition policy (also known as antitrust policy) deals with markets where competition can arise; however, given the behaviour of some firms in those markets, competition is restricted. There are markets in which increasing the level...

What is a “natural” monopoly? How is that different from a “government created” monopoly? What is the role of regulation in monopolistic markets?

What is a “natural” monopoly? How is that different from a “government created” monopoly? What is the role of regulation in monopolistic markets? How and why does government exercise power over mergers and acquisitions? How does monopoly affect societal welfare?

A government can reduce the welfare inefficiencies caused by a monopoly by imposing tariffs. setting the...

A government can reduce the welfare inefficiencies caused by a monopoly by imposing tariffs. setting the price to the Average Total Cost. taxing the monopoly. All of the above.

1. The ________ cost pricing rule means that the government can regulate a natural monopoly to...

1. The ________ cost pricing rule means that the government can regulate a natural monopoly to minimize deadweight loss without forcing the private firm out of the market. variable total average marginal fixed 2.If the short-run supply curve and the demand curve intersect below the long-run supply curve, firms will experience ________ economic profits, meaning the price is ________ the minimum point on the average total cost curve. zero; above positive; above negative; below positive; below negative; above 3.If firms...

Question