Document
Essay Preview: Document
Report this essay
Monopoly (derived from the Latin word Monopolium – Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods.
Monopoly should be quite different from monopsony, in which there is only one buyer of the product or service. It should also different from phenomena of a cartel. In a monopoly, a single firm is the sole provider of a product or service; in a cartel a centralized institution is set up to partially coordinate the actions of several independent providers.The fundamental reason for single firm prevalence is usually the barriers to entry.The product or service is quite unique in ways, which go beyond brand identity, and cannot be easily replaced.In a pure monopoly a single firm controls the total supply of the whole industry and is able to exert a significant degree of control over the price, by changing the quantity supplied In subtotal monopolies a single organization controls enough of the supply that even if it limits the quantity, or raises prices, the other suppliers will be unable to make up the difference and take significant amounts of market share.The reason a pure monopolist has no competitors is that certain barriers keep would-be competitors from entering the market. Depending upon the form of the monopoly these barriers can be economic, technological, legal (e.g. copyrights, patents), violent (competing businesses are shut down by force), or of some other type of barrier that completely prevents other firms from entering the market.