Question

Suppose you reside in the Caribbean and purchase exclusive territory rights for a McDonald's franchise. You can construct as many locations as you choose on all the islands, but while other business owners can open other franchises such as Burger King and Wendy's, no one else can open a McDonald's. Does your exclusive license represent a monopoly? Explain.

Answer 1

Yes, the exclusive license for a McDonald's franchise represents a monopoly.

Step-by-step explanation:

This is an example of franchised monopoly which is a status the government usually give to an individual or a firm.

A monopoly is a situation whereby only one individual, company or corporation dominates a particular type of business, sector or industry and nearly all the market for that commodity belong to that individual, company or corporation.

In the case of franchised monopoly, the individual, company or corporation is given a shield from competition from other firms because of the exclusive license or patent the government grant him.

Therefore, the exclusive license for a McDonald's franchise represents a monopoly.

Answer 2

Answer: The exclusive license to build Mc Donalds does not represent a monopoly because an artificial monopoly is a type of monopoly in which the monopolist uses some means to prevent more products from going to market than his own, and in this case Although you can exclusively open Mc Donalds, there is no prohibition or limit for others to open a Burger King or Wendy.