Final answer:
A monopoly model is preferred by businesses because it allows them to face less competition, enabling them to set higher prices and have greater market control.
Step-by-step explanation:
A monopoly model is preferred by businesses because they see less competition as a benefit. Monopolies can arise in markets for several reasons. These include scenarios such as:
- An industry where economies of scale are very small compared to the size of demand in the market, allowing a single producer to efficiently meet all market demand.
- A company with a well-established reputation for slashing prices in response to new entry, which can deter potential competitors.
- A well-respected brand name that has been carefully built up over many years, creating customer loyalty that new entrants might find difficult to overcome.
In each of these scenarios, a lack of competition enables companies to set higher prices and exercise greater control over the market, which is considered a significant advantage for the incumbent business.