a) Sources of monopoly power
Legal barriers
This takes the form of statutory monopolies or patents i.e. monopolies established by an Act of parliament and patent meaning that a firm is protected from competition of new firms.
Products differentiation barrier
This may be in form of product uniqueness, advertisements and branding where an existing monopolist may exploit his position as a supplier of an established products which the customer is persuaded to believe that it is the best.
Economies of scale barriers
Thiscould arise where existing firms are already operating on a vast scale production and enjoying technical economies of sale.
Transport cost and tariff barriers
Some firms may enjoy local monopoly position arising from the ability to sell more cheaply in their own localities than other firm. Such firms can therefore rise prices in their local markets above the production cost by an amount that does not exceed transport cost close of firm in other localities with similar production cost
