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Monopoly

Monopoly is the market structure in which there is single sellers of product having no close substitutes.

  • In this type of market, firms are price maker, meaning they determine the price of the product.

Examples of Monopoly:

  • NEA
  • NOC

1.) Single Seller

  • One firm dominates the entire market.
  • The firm and the industry are the same in a monopoly.

2.) No Close Substitutes

  • The product or service offered has no close substitutes, meaning consumers have no alternative choices.
  • Example: Local electricity providers.

3.) High Barriers to Entry

  • Entry of new firms is restricted due to factors like:
  • Legal barriers (patents, licenses).
  • High initial investment costs.
  • Exclusive ownership of resources.

4.) Price Maker

  • The monopolist sets the price for its product, as there are no competitors.
  • The price is determined based on demand and the monopolist’s production costs.

5.) Profit Maximization

  • A monopolist aims to maximize profits by producing at the level where marginal cost equals marginal revenue.

6.) Lack of Competition

  • Consumers have no choice but to buy from the monopolist or go without the product.

7.) Possibility of Price Discrimination

  • A monopolist can charge different prices to different consumers for the same product based on their willingness to pay.
  • Example: Airline ticket pricing.

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