Question

Monopoly is a market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. Monopoly typically has an unfair advantage since they are either the only provider of a product or control most of the market share or customers for the product. Although monopolies might differ from industry-to-industry, they tend to share similar characteristics. Discuss at least three (3) of these characteristics in your own

Answer 1

Monopoly is made of two words—’Mono’ and ‘Poly’. ‘Mono’ means single and ‘Poly’ means seller. Thus, ‘Monopoly refers to a market situation where one firm or a group of firms which are combined to have a control over all the supply of the product.

In other words, Monopoly is a market situation in which there is only one seller of a product.

The basis characteristics shared by all the monopolies firm in different industries are as under-

1. Single Producer or Seller:

There must be a single producer or seller. He may be an individual or a firm of partners or a joint stock company. There will be one seller and large number of buyer. The seller has full control over the price of the good as he doesn't have competition in the market.

2. Barriers to the Entry of New Firm:

There must be strict barriers to the entry of new firms either in the market or to do production. Some of the key barriers to entry are: (1) government license or franchise, (2) resource ownership, (3) patents and copyrights, (4) high start-up cost. Other sellers are unable to enter the market of the monopoly.

3. Unique Product with no close substitute :

The commodity dealt in should have no closely competition substitutes. That is, there should be no other firm or firms producing similar products. Because of this feature the buyer has no option to buy other then from the monopoly seller. The seller has full control over the price.The firm is the price-maker and not price taker.