Chapter 9, Problem 14AA

To determine

To state: Four categories of pure monopolies.

Answer to Problem 14AA

There are four types of monopoly namely: Geographic, Natural, Government and Technology.

Explanation of Solution

Geographic Monopoly:

A geographic monopoly is a condition that occurs when one single company holds the entire for a particular product and service. This happens because the area is so limited and the customer base is so small that there lies no point for additional sellers to enter the market because it will not generate them enough profit to survive the market.

Natural Monopoly:

A natural monopoly is a condition in an industry in which the infrastructural or initial capital costs are so high that it is difficult for any other supplier to enter the market. The first largest supplier has an upper-hand over potential competitors making it difficult to create space for the new entrants in the market. Electricity services are one of the instances of natural monopoly.

Government Monopoly:

In a government monopoly, the state, central or local governments are only permitted to provide certain product or service because any competitors for such product or service is legally prohibited. Highways, bridge construction are one such examples of government monopoly.

Technology Monopoly:

A technological monopoly is a condition in an industry where only one firm controls exclusive privileges over the technology to manufacture a particular product or service.

Microsoft Windows operating system is an example of technology monopoly.

Economics Concept Introduction

Introduction: Monopoly is a type of market structure in which there is only one single seller.