What is Monopoly?

Monopoly is a completely opposite form of market and is derived from two Greek words, Monos (meaning single) and Polus (meaning seller). A market situation where there is only one seller in the market selling a product with no close substitutes is known as Monopoly. For example, Indian Railways. In a monopoly market, there are various restrictions on the entry of new firms and exit of existing firms. Also, there are chances of Price Discrimination in a Monopoly market. 

Features of Monopoly Market

• Single Seller: There is only one firm that supplies the entire market. This firm is the sole producer of the good or service.
• No Close Substitutes: The product offered by the monopoly has no close substitutes. Consumers have no alternative products to switch to, which gives the monopolist significant market power.
• High Barriers to Entry: Significant barriers prevent new firms from entering the market. These barriers can be legal (patents, licenses), technological (high startup costs, unique technology), or resource-based (control over a key resource).
• Price Maker: The monopolist has substantial control over the price of the product. Unlike in perfect competition, the monopoly can influence the market price by adjusting the level of output.
• Profit Maximization: The monopolist maximizes profits by setting a price where marginal revenue equals marginal cost (MR = MC). This often results in higher prices and lower output compared to competitive markets.
• Price Discrimination: The monopolist may practice price discrimination, charging different prices to different consumers based on their willingness to pay. This can lead to increased profits.
• Lack of Economic Efficiency: Monopoly markets are often less efficient than competitive markets. They can lead to allocative inefficiency (where resources are not used in the most valued way) and productive inefficiency (where goods are not produced at the lowest possible cost).

Also Read:

• Market : Characteristics & Classification
• Monopoly Market: Features, Revenue Curves and Causes of Emergence
• Monopolistic Competition: Characteristics & Demand Curve
• Distinction between the four Forms of Market(Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly)

The number and types of firms operating in an industry and the nature and degree of competition in the market for the goods and services is known as Market Structure. To study and analyze the nature of different forms of market and issues faced by them while buying and selling goods and services, economists have classified the market in different ways. The different forms of market structure are Perfect Competition and Imperfect Competition (Monopoly, Monopolistic Competition, and Oligopoly).