Meaning of monopoly:

The word monopoly is made up of two words-mono means single and poly means to sell. Thus monopoly means presence of a only one seller in the market. Monopoly is that type market in which only one producer controls the complete supply of a one commodity that has no similar substitute. A monopoly is a market structure characterized by a single seller or producer dominating the entire industry, with no close substitutes for its product. In a monopoly, the seller has significant market power, and barriers to entry prevent the entry of new competitors. The features of monopoly are.

According to Professor Watson: a monopoly is the only producer of a product that has no close substitute.

Features of monopoly:

• Single Seller: In a monopoly, there is only one producer or seller that controls the entire supply of a particular product or service.
• Control over Supply: Monopoly will have complete control over output and supply of the commodity.
• Price maker: the monopolist is the price maker and In taking decision on price fixation, he is independent. He can set the price to the best of his advantage. Hence he can either change a high price for all customers or adopt price discrimination policy.
• Entry barriers: entry of other firms is banned somehow. Hence monopolist will not have direct competitors or direct rivals in the market.
• Firm and industry is same: there will be no difference between a firm and an industry
• Nature of firms: the monopoly firms may be a property concern, partnership concern, joint stock co. or a public utility that pursues an independent price output policy.
• Existence of super normal profits: here will be place for super normal profit under monopoly because market price is greater than cost of production.
• Unique Product: The monopolist typically offers a unique product or service with no close substitutes. Consumers have limited or no alternatives.
• Barriers to Entry: Barriers to entry are significant obstacles that prevent or restrict new firms from entering the market and competing with the monopoly. These barriers can include high startup costs, economies of scale, legal restrictions, and exclusive access to key resources.
• Market Power: The monopoly has significant market power, allowing it to influence the market price by controlling the quantity supplied.
• No Close Substitutes: Consumers have limited or no choice when it comes to similar products. They must either buy from the monopolist or forego the product altogether.
• Profit Maximization: A monopoly aims to maximize its profits by adjusting the price and quantity of output. This is typically achieved by producing where marginal cost equals marginal revenue.
• Lack of Competition: With no direct competitors, a monopoly faces little external competition, allowing it to enjoy higher profits in the absence of price competition.
• Importance of Monopoly:
• Economies of Scale: Monopolies can achieve economies of scale, reducing average costs as production increases. This efficiency can lead to lower prices for consumers.
• Innovation Incentives: Monopolies may have more resources and incentives for research and development, leading to innovation and the development of new technologies.
• Stable Output and Prices: In a monopoly, output and prices can be more stable compared to markets with frequent changes in competition and market structure.
• Natural Monopolies: Some industries, like utilities (electricity, water, etc.), exhibit natural monopolies due to high fixed costs. In such cases, a single provider may be more economically efficient.

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