Answer to Question #42978 in Microeconomics for abdulla sabit

Question

What is monopoly?Suppose,Firm-X only produces a product which is not produced by any other firm in the market;however,the product got close substitutes.Can we consider this firm as monopolist firm?Explain.

Answer 1

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which
consists of a few entities dominating an industry). Monopolies are thus characterized by a lack of economic competition to produce
the good or service and a lack of viable substitute goods.

If the product got close substitutes, this firm is not a monopolist, but there is a market of monopolistic competition, where goods are differentiated.