Answer to Question #163328 in Microeconomics for Astha

Question

monopoly features

Answer 1

Features of Monopoly

Monopoly as explained by Komleh (2020) refers to a market structure where there is only one seller of a certain commodity. The seller has full control of the market and determines the supply and price of that commodity.

Features

1.     Single seller and a large number of buyers

A monopoly market is served by a single firm which also the industry. The single firm serves the market demand of a product or service which has many buyers.

2.     Barriers to entry of new firms

In a monopoly structure, other suppliers are restricted from entering the market. Even when the firm is making abnormal profits, restrictions such as license, resource ownership, patents, and high start-up costs prevent other firms from entering the market.

3.     No close substitute

The monopoly firm produces a unique product such that there no close substitute for the product being supplied.

4.     Profit maximizer

Under monopoly, the firm has full control over the supply of a commodity, due to this fact the firm can set prices higher and this becomes the market price for the good/service.

5.     Price discrimination

A firm in a monopoly market can change the price of a product and sell it at different prices to different buyers. Since the market is elastic, the firm will sell a higher quantity if the price is low and increase the quantity of the price is high.  

 

Reference

Komleh, R. A. (2020) A comparison between conditions of perfect competition market and pure monopoly in supply, demand, and equilibrium.