What are the main causes that lead to monopoly Essay

What are the main causes that lead to monopoly - Essay Example The producer should have the necessary infrastructure that includes technology and other requirements which enable them to produce the specific goods or services and sell them at a reasonable price. This situation can be construed as a natural monopoly because the competitors cannot produce such commodities with patented technological capability, which they cannot acquire. The producer will have an exclusive control over a patent with regard to the manufacturing process of a specific product. Moreover, a company may be granted a right to produce a commodity or service by the government (Peterson, Monopoly, 2005). Monopoly bestows upon a producer an exclusive possession of the market. Since, the producer controls the production it is possible for him to reduce production and increase prices with the sole aim of maximizing profits. Monopoly exists whenever the market has barriers to prevent the entry of competitors. The government creates such barriers in the case of natural monopolies. Further, the government itself provides some specific services or goods through local governmental bodies or franchises the same to a company and it regulates the production and prices of goods or services. Moreover, patents also create barriers in the market (Monopoly, 2003). Technological advancement or the necessity to use a particular variety of machinery to produce commodities also serves to discourage competitors. Furthermore, large scale production and integrated operations enhance efficiency, and cost effective measures reduces prices. Adopting such measures will be beneficial to companies to cut down costs and provide goods to the consumers at reduced rates. Monopoly arises when a company indulges in anticompetitive activities which create barriers to trade (Monopoly, 2003). In order to avoid abuse of the status of monopoly and to protect the consumers from monopolistic behaviour of companies, most nations