Explain five circumstances in which a firm may acquire monopoly power (10 marks)

Explain five circumstances in which a firm may acquire monopoly power

Circumstances in which a firm may acquire monopoly power include:

1. If the firm has the sole right to a production technique. This denies other firms the use of the technique.
2. If the firm has control over strategic inputs. This makes the firm to have sole access to inputs used in the production of the commodity.
3. If the firm is the only one with large capital required for the venture. Other firms may not be able to raise the capital leaving the field to one firm.
4. If the firm enjoys economies of scale. This enables the firm to produce at a lower cost than the other firms.
5. If the firm is set up as a parastatal and given exclusive rights of production of a particular product by the government.
6.  If firms merge. When firms join together to form one large firm, this gives them advantage due to size.
7. If it is the first firm in a small market that is served by one firm more economically. New firms entering the market may make losses due to low sales hence the original firm remains dominant.
8. Lithe firm has patent rights/copyright which bars other firms from producing) selling the products.

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