Question

Explain the characteristics of a Monopoly

Answer 1

Solution-

Some of the characteristics of monopoly are-

1) There is only a single seller of a product.

It is because of copyright and patent over a product so entry of new producer or seller is restrained.

2) There is an absence of supply curve in monopoly market.

This is because the seller sells the same product at different prices to different buyers.

3) In the monopoly market, sellers can earn supernormal profits in both the short and the long run.

Supernormal profits are earned whenever the price exceeds the average cost for a product.

In the monopoly market, entry of new firms is strongly restricted, so existing producers in the monopoly market enjoys economic profit even in the long run.

4) There are no close substitutes of products produced by the sole seller in the monopoly market.

5) Firm and industry have single indentity as there is only one firm operating as the sole supplier of products.