WAEC Economics 2012 Theory — Question 7

Model answer

(a) A market in economics refers to any arrangement where buyers and sellers of a commodity relate/interact for the purpose of exchange, not necessarily a physical location. (b) Features of a monopoly: (i) There is only one seller/producer of the commodity. (ii) The commodity has no close substitutes. (iii) There are barriers to entry into the industry, preventing other firms from competing. (c) Sources of monopoly power: (i) Legal backing (patent right/licence). (ii) Control of a key/scarce resource needed for production. (iii) Large economies of scale that make it uneconomical for new firms to enter.