Question

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Answer 1

When government offers patent rights, copyrights, or intellectual property rights or any other exclusive right upon the certain type of scarce resources, then a monopoly is created that is sponsored by the government. Hence, by providing these rights, government is involved in creating monopoly. but, government does it to promote the private property rights and encourages firms to spend money (funds) on research & development, technological advancements, innovation and other creative work so that economy as a whole grows. So, government offers these rights as rewards to those who exhaust their funds and do hard work to find something that helps the whole mankind. So, government creates such type of monopoly.

For example, Pfizer as pharma company is awarded to produce one medicine formulation as it is discovered and recognized by the their own R&D work.