MicroEconomics Essay Example | Topics and Well Written Essays - 500 words - 1

MicroEconomics - Essay Example This type of monopoly emerges due to natural advantages like abundant mineral resources, good location and so on. For instance, Gulf nations have monopoly in the exploration of crude oil as a result of plenty of natural oil resources (Mankiw & Taylor, 2006).   It also occurs when it is financially impractical or impossible for many companies to engage in a business, for example, when it requires large investments of capital that other companies cannot raise (Tucker, 2011). This occurs when the government passes laws and regulations that reserve a particular trade, services or goods for government agencies (McKenzie & Lee, 2006). For instance, many governments are in charge of running water. Occurs when multiple businesses or firms combine or amalgamate, for example, a combination between competitors like Burger firm and Pizza firm leads to join monopoly thus reducing competition (Tucker, 2011). Monopolies exist so as to dominate the market place by controlling the pricing of a specific product. This is due to lack of economic competition because such a firm controls a significant volume of the market. It also exists due to high overhead cost which discourages other firms (Tucker, 2011). For instance, it requires a high overhead cost to construct power lines from scratch and acquire necessary equipment to generate power, making power company a monopoly. c) Intellectual property protection- extension of patents and copyrights to businesses by the government give them the right of being the sole provider of that new product thus creating a temporary monopoly (Mankiw & Taylor,