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Chemichemi Ltd operates as a monopolist. Explain five factors that may have made the firm acquir monopoly power?

Chemichemi Ltd operates as a monopolist.
Explain five factors that may have made the firm acquir monopoly power?

Answers

The following are the factors that saw the firm acquire the monopoly power;
1.Barriers to entry
Barriers to entry are factors that prevent or make it difficult for new firms to enter a market.They include;economics of scale,geographical barriers,limit pricing,predectory pricing,vertical integration etc.Chemichemi had all these advantages over all other firms trying to enter the markets therefore making it acquire and maintain the monopoly power.
2.Number of competitors
The smaller the number of competitors in the market the greater the monopoly power.This means that the market at which Chemichemi ltd is operating has a small number of able competitors.This made it to acquire the monopoly power.
3.Advertising.
The greater the advertising spend and more recognizable the brand name the greater the monopoly power.To maintain its monopoly power power,the firm must be willing to sacrifice great spend on advertisements.This is to make sure its brand name spreads faster and be more recognizable.
4.Degree of product differentiation
Product differentiation is a marketing process that has the objective of making customers perceive the product of a specific firm as unique or superior to any other product belonging to the same group, and so creating a sense of value. The larger the degree of product differentiation the greater the extent of the monopoly power.Chemichemi must have its own way of product differentiation that beats the others out of the game hence making it acquire the monopolistic power.
5.Import Duties and Market Protection
Maybe the country in which Chemichemi ltd is based on the government protects the market from foreign firms through cutting down the import of some goods which in one way or the other this firms suppliers.This will make it acquire and maintain the monopolistic power.

(i)Control of an important factor of production which other firms may not be able to access
(ii)Legal restrictions. Other firms might not be allowed by the government or law to operate a competing business
(iii)High initial capital which other firms might not be able to raise
(iv)Size of the market. The market can be small that can only be served by one firm, a new firm coming in will lead to losses.
(v)Restrictive practices

nathan1 answered the question on June 29, 2018 at 14:52

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Chemichemi Ltd operates as a monopolist. Explain five factors that may have made the firm acquir monopoly power?

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