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Natural monopoly is a one firm can produce at a lower cost compared to what two or more firms could produce or it is the lower due to economies of scale if there is just a single producer than if there are several competing producers. For examples, a bigger plant in the generation electricity can supply electric power with lower cost compared to a few firms.

Government-Created Monopolies

This section is to look into the government-created monopolies, government created have many monopolies. This is to prevent firms from entering business into a market. This can be done through difficulty in obtaining license to operate in the market or providing patent and copyrights to a monopoly firm. Government franchise, government license, patent, copyright and control over raw material are the some legal barriers for a business.

Government franchise, in most of the countries, the government grants monopoly rights to privates companies to operate public utilities such as water supply, postal services, railway services, cable TV services and many more. Government franchise grants exclusive rights to a firm to sell certain goods and install in a certain area. For example, government had giving the right to install cable television system to Astro in Malaysia.

Government License, in basically enterprise is needs to obtain a license to operate any kind of business in the market. Government license controls the entry of s firm into a market and it is make the earlier firm as a monopoly firm. To obtaining a license in a monopoly market is much if difficult compared to the others market structures.

Patent, A patent is a grant issued by the government to the owner of an invention which gives him exclusive rights over the invention for a limited period of time or it is an exclusive right to the production of an innovation product. To the firms or individuals for their discoveries and invention are given by a patent. For example, invention of genetically modified organism (GMO) in rice can yield more production, because GMO having the patent to the inventor to commercialize its products. Thus, for the normally limit time period of the patent is takes about 20 years and after that the monopoly power over the product will expire.

Copyright, it is enacted by most government, is an exclusive right given to the author of a composer of a music or producer of a movie or artistic work and book. For example, the copyright this book belongs to Oxford-Fajar Snd Bhd and no other publisher or individual can copy this book or print this book without permission from Oxford-Fajar Sdn Bhd. The Oxford-Fajar has the right to sue the people who to prints out the book without permission.

Control over raw material, in which a firm can be bigger portion of natural resources and within a monopoly status can also be maintained through control over supply of raw material.

QmThe diagram of Monopoly

•A Monopolist is a price maker because he does not face any competitors. Therefore demand is price inelastic.
•A monopolist will seek to maximize profits by setting output where MR = MC
•This will be at output Qm and Price Pm.
•If the market was competitive the price would be lower and output higher.

Question 2
Answer

Introduction
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