Basis (Origin/Sources) of monopoly power

Monopoly power refers to the ability of the producer to   determine the price of the commodity and restrict entry of other producers from entering the market.

The factors which give rise to monopoly power include the following:-

1. Patent rights.  These are legal barriers where the products of some people like authors; musicians etc. are protected from other producers by law. The law forbids other producers or firms from producing a similar commodity. The producer is given the sole right to produce a commodity or provide a service for a certain period of time without interference from other producers.
2. Ownership of a strategic raw material. Some firms or countries may be having the capacity to control the ownership of the only raw material.  Therefore  they  become  monopolists  in the production of a certain commodity using such a raw material under their ownership e.g. middle east has the monopoly power in oil production.
3. Exclusive knowledge    of production     techniques; in this case a person or firm may possess specific and unique knowledge which may not be possessed by others in the production process e.g.  some  specialists  in  the  medical  field  whose  services  cannot  easily  be  substituted  like surgeons.
4. Long distance   between   potential    rivals.   Long distance can be the source of monopoly power among the producers of the same commodity in different localities. Each producer monopolizes the region in which his production unit is located as other producers from other regions cannot interfere due to long distance.
5. Large scale of production. The large efficient and well established firm may adopt the limiting pricing policy which aims at preventing the entry of new firms and elimination of the already existing inefficient firms by charging lower prices for the commodity in consideration. The large scale firm remains a monopolist because other firms are pushed out of the production process.
6. Protectionism (trade restrictions). This is where the government imposes tariffs and non-tariff barriers on the imported products so as to reduce foreign competition on the locally produced goods. The home producers therefore become monopolists as they are protected from foreign competition.
7. Merging of firms. This is where two or more firms producing related commodities come together to form one firm   (collective monopoly).  This can be aimed at controlling the materials, market, price of the commodity etc.
8. Product differentiation.    This  is another  form  where  the  firm  may  become  a  monopolist  by supplying a commodity that is differentiated from others by certain trade market or brands.
9. Nationalization by the government. In this case, the government can take over private individual firms and therefore it becomes the monopolist.
10. Market limitation. The entry of new firms may be limited due to existence of a small market this is because they may find it uneconomical to and therefore already existing firm remains the monopolist.

11. Large capital requirements. Some firms may remain monopolist due to failure of other firms to raise enough capital to start similar businesses e.g. iron and steel industry.
12. Long period of training, Monopoly power can be created by restricting entry of new individuals by extending the training period required to join a given profession (industry).