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
Features of Monopoly
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.