Match each source of monopoly power on the left with its corresponding economic foundation or market scenario on the right.
- Natural MonopolyA situation where long-run average costs decline continuously over the entire range of market demand, making single-firm production cheapest.
- Statutory (Legal) MonopolyAn exclusive operating right granted by government decree, parliamentary act, or public utility charter.
- Technological MonopolyOwnership of proprietary technical knowledge, specialized secrets, or patent protection prohibiting replication.
- Collusive Monopoly (Cartel)A formal agreement among independent firms to restrict aggregate output and jointly dictate market price as a unified entity.
Answer
Natural Monopoly matches with continuous long-run average cost decline over market demand; Statutory Monopoly matches with exclusive government decrees or charters; Technological Monopoly matches with proprietary technical knowledge and patents; Collusive Monopoly matches with formal agreements among independent firms to jointly dictate prices.
Each classification accurately reflects the underlying economic origin of market power: Natural monopoly relies on structural economies of scale; Statutory monopoly relies on state legal grants; Technological monopoly relies on patents and secret processes; and Collusive monopoly relies on cartel agreements among independent firms.
Step-by-Step Solution
Key Concept
Classification of Sources of Monopoly Power