Explain any two sources of restricted entry under monopoly.

Monopoly is a market structure where there is a single firm as a producer of goods that has n close substitutes. Being the sole operator of the market condition, the seller has the authority to fix the price on his own. Monopoly arises in the market due to the existence of many barriers to entry. It may be legal, technical or economical. Some sources of the restrictive entry under monopoly are:

• Control of inputs: The large and dominant firm may become a monopoly in the market by controlling the supply of inputs and raw materials for the production process. This will make the entry of the other firms very expensive and impossible thus leading to the formation of monopolies.

• Legal barriers: This is the most common barrier leading in the creation of monopolies. It includes patents, trademarks and copyrights. They are granted to the firms for a technology or product and can result in the creation of monopolies. Out of these, patents are not a permanent source of monopoly.

• Licenses: The government in some strategic sectors may restrict the entry of firms by introducing the licensing policy. The government will block the entry of firms by making licensing compulsory. Nuclear science, railways and other sectors are monopolised because of licenses.