Governments often have the point to influence whether fins air monopolies How mi
ID: 1204693 • Letter: G
Question
Governments often have the point to influence whether fins air monopolies How might the government affect whether a firm is a monopoly? The government could grant a patent to a firm making it a natural monopoly. grant a firm a public enterprise, allowing it to benefit from network externalities grant a copyright to a firm, giving it the exclusive tight to produce a product grant a firm a public franchise making it a natural monopoly reduce taxes so that a firm benefits from diseconomies of scale.Explanation / Answer
Monopoly can emerge due to following reasons -
1. Through government licensing - If government provides license to only one firm to operate in a market then being a single firm due to license provided by government, such firm act as monopoly.
2. Sometime companies due to thier research and development endeavors formulate an exclusive product or service. The government provide patent rights to companies with respect to such new product or service. This patent right make the company developing such product or service, an exclusive producer of that product or service. Such exclusive production give emergence to monopoly with respect to market for such product or service.
3. Sometimes some firm forms a cartel directly or indirectly thereby take shape of single firm and create monopoly in the market.
4. Control over raw materials also leads to emergence of monopoly. This is because majority control over raw material enables a firm to exert substantial influence over market and creates a monopoly like situation.
As we can see from above discussion that government can create monopoly through exclusive licensing ot grant of patent.
Hence, option (A) and (C) are the correct answer.
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