Describe the factors that influence the production and pricing decisions of monopolies.

In production, the power to control natural resources is a critical factor since those resources are essential. It is a source of monopoly power. Owning the resources provides the monopoly firm with the ability to increase the market price over the marginal cost. Controlling of resources makes the monopoly firm charge financial rent.

In deciding on cost, the Monopoly market has a single producer and multiple consumers. Its characteristics are lack of competition in the production of goods and services, and also, the goods or services offered has no close substitute. Due to those factors, the firm has the authority to dictate the price of commodities. For instance, it is costly to establish a power line in electricity distribution and is ineffective to have an additional provider. Electricity consumers have few options since there is no close substitute. As a result, if the provider opts to increase electricity cost, the consumer will have no option rather pay new charges since the supplier is the price maker.