Question

What are the reasons for the existence of monopoly in a particular industry? Provide example for each.

Answer 1

Some of the reasons for the existence of monopoly are:

1. Operational issues: In order to have a uniform services in certain areas like public transport, railways, power corporations, water and gas supply government would have control in order to avoid exploitation of customers

2. Patents: having unique control on the usage of certain medical drugs because of patents, firms enjoy the position of monopoly

3. Non availability of substitutes and limited resources: For certain goods because of being unique and non availability of substitutes gives monopoly power, like diamonds, gold etc

4. Cost advantage: Certain firms like Amazon, because of cost advantage earn monopoly and dominates the market.