Explain the main sources of monopoly power.
- Barriers to entry, for example patents, restrict the number of competitors in a market. They may be deliberate, e.g. patents, or inherent in the good, e.g. water. Where they are inehrent, a 'natural monopoly' occurs. Monopolies may be a single firm in the market or created through collusion or cartels at the production or selling stage.
- Advertising and product differentiation can help to enlarge perceived differences in products. This reduces the elasticity of demand for certain products and enables one firm to take control of a market, e.g. Apple.
- Lack of consumer infromation can also allow monoply power to build up, as consumers are unaware of all of their options and therefore may be deceived into buying a certain product, allowing monoply power to build up.
