The original Seven Essays, in a cool, new outfit ...


Monopolies refer to market conditions where a singular entity: person or company happens to be the only supplier or seller of a particular product or service. Monopoly does not concern with control over a market, or making decisions on behalf of it.
While the economic competition is lacking, so also is a viable substitute produce or service. There could be
several reasons why the competition is excluded, however, monopolies immediately provide the dominating company with the ability to raise prices at will.
Size is typically not a characteristic of a monopoly, though many such companies in the past had acquired large sizes.
Order your tutorial now!
…contact us at [email protected] if you had any questions.
Market interactions are typically distorted due to the market power that monopolies have. Goods produced are fewer and prices are raised in order to achieve greater margins, using a market skimming approach. Where government
does not sponsor a monopoly, they may form out of mergers or even naturally out of innovation. Legal provisions aim
at certain behaviors when a company is in a dominant position, but not on being in a dominant position itself.
The role of a government monopoly is that of inducing creativity by granting companies rights to the fruits of their innovation. Other reasons why governments sanction this structure is to foster investments in a risky venture or sustaining a domestic interest group.
Order your tutorial now!
…contact us at [email protected] if you had any questions.
Tools to sanction monopolies can be from patents, trademarks, copyrights etc. Sometimes due to the sensitivities attached to an industry, the government may enter the business by itself and create a state-monopoly.
Barriers to entry are insurmountable. These can be brought about by economies of scale, where companies are able to produce more goods at progressively cheaper prices, capital requirements (as with a large factory),
technological superiority etc. There may also be no close substitutes for the product. Control over natural resources and network externalities are additional reasons for creating and sustaining a monopoly.
Profits are set to be maximized, and the price maker has control over the price of goods or service. The company becomes the industry; depending upon the elasticity of the market, there may be more sales for less price and vice versa.
Order your tutorial now!
…contact us at [email protected] if you had any questions.