What are the four main reasons monopolies arise?

Monopolies arise due to:

1. A single firm having sole ownership or control over the resources needed to make the product. Since it is the only firm who acquired the resources, it is also the only firm to produce and supply the product.

2. Government intervention. The government plays a big role in the monopoly market through regulation. For example, it gives patents to firms who pioneers in producing a certain drug. Patents give the firm an exclusive right to a certain product where only one firm produces the product.

3. Natural monopolies and economies of scale. A natural monopoly is a market where there are few firms but only one firm generates the most production. This may be from a lower cost of production which causes a lower selling price.

4. Barriers to entry. Merger and acquisition cause two or more firms to combine to form one firm. The combined firm will have a higher capital used for investment such as for research and development. This restricts new firms to enter the market.