Match each source of monopoly power on the left with its corresponding economic scenario on the right.
- Legal Monopoly (Patent Rights)A pharmaceutical company holds exclusive statutory rights to produce a newly invented life-saving medicine for 20 years.
- Natural MonopolyA single firm operates the nation's public water grid because unit costs continuously decline as output expands to serve the entire market.
- Control of Raw Material InputsA mining corporation holds total ownership of all known bauxite deposits required for domestic aluminum smelting.
- State Monopoly (Government Franchise)A statutory public corporation is established by law as the sole provider of national postal services to safeguard public utility.
Answer
Legal Monopoly (Patent Rights) matches the pharmaceutical firm's exclusive statutory rights; Natural Monopoly matches the single water utility benefiting from extensive economies of scale; Control of Raw Material Inputs matches sole ownership of essential bauxite deposits; State Monopoly matches the government establishing a statutory public postal corporation.
Each barrier to entry defines a distinct mechanism creating monopoly power: legal monopolies arise from statutory patent grants; natural monopolies result from significant economies of scale in infrastructure-heavy sectors; raw material monopolies rely on key input ownership; and state monopolies are instituted by government decree.
Step-by-Step Solution
Key Concept
Sources of Monopoly Power and Barriers to Entry