Answer to Question #208839 in Microeconomics for Sinentlahla

Question

How government are involved in creating monopolies (10)

Answer 1

Answer

Government is involved in many ways in creating monopolies

• Government can give a single firm the exclusive right to produce some good.
• They can grant sole ownership of inventions through patents and copyright laws in order to help eliminate the market failure that is likely to otherwise occur in the market for those goods.
• Government does take control of a certain business or an industry is another way to create a Monopoly.
• Granting of company exclusive rights to provide services and goods. For example the British-East India Company to which the British Government granted exclusive rights to import goods to Britain from India in 1600.
• Transportation sectors is also monopolized through government regulations such as bailouts which favour automakers and airlines
• The government can also monopolize the health care through state leisure laws restricting the supply of doctors and other health professionals.
• In other cases the government uses policies that govern industries which are seeking to encourage innovation.