Final answer:
A true monopoly is characterized by substantial barriers to entry that prevent competition, coming from either natural economic factors like economies of scale or legal protections. Monopolies can be categorized as either natural or legal monopolies, depending on the nature of the barriers they leverage. Additionally, predatory practices can also establish monopoly power by deterring potential entrants.
Step-by-step explanation:
When determining whether a company is a true monopoly, it's important to understand the concept of barriers to entry. These obstacles can be so substantial that they prevent other companies from entering the market, thereby allowing a single company to control a particular industry or sector. Barriers to entry can include economic factors such as economies of scale, control of essential resources, and legal protections such as patents, copyrights, and trademarks that provide intellectual property rights.
Two main types of monopolies exist based on these barriers. A natural monopoly results from economies of scale where it is more efficient for one firm to supply the market, as seen in industries with high infrastructure costs that make competition impractical. In contrast, a legal monopoly occurs when laws prohibit or limit competition.
It is also essential to consider if practices like predatory pricing are being used to intimidate potential competitors. These are deliberate attempts by a company to undercut competitors to a degree that would prevent them from entering the market. Therefore, a company can exhibit monopoly-like dominance not just due to legal rights or control of resources, but also through strategic and sometimes anti-competitive behavior.