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CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition

Which of the following is a recognised source of monopoly power?

Ownership of a patent is a source of monopoly power, because it gives the holder the exclusive legal right to produce a product and keeps rivals out. Monopoly depends on barriers to entry, unlike free entry, many substitutes or perfect knowledge, which suit competitive markets.

  1. AFree entry and exit of firms
  2. BOwnership of a patent granting exclusive right to produce a productCorrect
  3. CMany close substitutes available to buyers
  4. DPerfect knowledge among all buyers and sellers

Explanation

Monopoly persists because barriers keep rivals out, such as patents, exclusive control of key raw materials, or government licences. A patent gives the holder an exclusive legal right to produce, creating a barrier. The other options describe features of competitive markets.

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