What defines a legal monopoly?

A legal monopoly is characterized by government-granted exclusive rights to operate in a particular market or to provide a specific service or product. This means that a legal monopoly is created through legislation or regulation, allowing a single company or entity to dominate a market without competition.

Governments may grant these exclusive rights for various reasons, such as to ensure the provision of essential services (like utilities, public transportation, or postal services), to encourage investment in industries where high fixed costs are a barrier to entry, or to maintain order and consumer protection in certain markets. Legal monopolies are often regulated to prevent abuse of power, ensuring that prices remain fair and services are provided adequately to the public.

The other choices do not accurately capture the essence of a legal monopoly. Exclusivity due to market demand can lead to a natural monopoly, but it isn't necessarily a legal monopoly without government involvement. Ownership of all distribution channels can give a firm significant influence, but it does not confer legal status. Control over pricing strategies relates to competitive advantages rather than the formal granting of market power by the government.