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Monopolies can arise several ways. A few examples include:
1. Economies of scale give an advantage to larger firms, which can produce in quantities that result in lower average costs than for smaller firms.
2. The government can create a monopoly by granting a company an exclusive right to serve an area.
3. A company can hold a patent on a product, effectively preventing other companies from producing similar products.
4. A company can own a key input needed for production. By limiting other companies' access to that input, they prevent other firms from entering the market.
5. A company can use the threat of violence to deter others from entering.
Identify a company that you believe is a monopoly. Which of the above best characterizes why that company has a monopoly?
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