Question

we discused five ways that a monopoly can arise name and describe each

Answer 1

Ways in which a monopoly is created-

1.Monopoly Resources

A monopoly can arise if a business is the only owner of a key resource.

Examples: Diamonds- De Beers.

Water- Sole owner of a well on a remote island.

2. Natural Monopolies

• A monopoly can arise if one business can provide a product or a service at a lower cost than two or more businesses could.

• Examples: Utilities such as pipelines, railroads and toll bridges.

• It is considered to be unattractive to enter a market where another business has a natural monopoly.

3.External growth

• In recent years many large businesses have grown rapidly particularly due to merging and acquisition.

• Such firms have become more powerful in their markets and have the ability to erect ‘barriers to entry’ in the hope of becoming a monopoly.

4.Government Created Monopolies

A monopoly can arise if a government gives a firm the ‘exclusive right’ to produce and sell a particular good or service.

Examples: Health care system in Canada

5.Subsidies. There’s no such thing as a free lunch. But, when the government is paying for it, the lunch sure does taste free. Subsidies offer an alternative, consumer-driven focus to acquiring monopoly status. Arbitrary revenue-boosts from the government will allow the monopolist to reduce prices to essentially nothing, all while maintaining profitability.