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Question:  Why do monopolies arise?

Answer:  The fundamental cause of monopoly is barriers to entry.  A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it.  Barriers to entry, in turn, have three main sources:

(1)  Monopoly resources - a key resource required for production is owned by a single firm;

(2)  Government regulation - the government gives a single firm the exclusive right to produce some good or service; and

(3)  The production process - a single firm can produce output at a lower cost than can a larger number of producers.}
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