3. Features Of Monopoly
The features of a monopoly are all based on the fact that there is only one seller and many buyers thus creating only one source of supply.
This leads to an extraordinary amount of power to the company at the center of a monopoly.
The features of monopolies are as follows:
1. Single seller and multiple buyers: The single most important feature of a monopoly is that there is onl
y one seller/dominant seller of the goods.
2. No close substitutes: In economics, substitute goods refer to goods and
services that are closely related to each other and perform similar functions.
3. No competition: The lack of any substitutes eliminates competition for
commodities sold in a monopoly market.
This lack of competition is a powerful incentive for firms as without
competition they are not subject to price wars for larger market share when in fact, they control all the
market share in that sector
No competition also allows the firm a lot of liberty in setting price and supply
giving them a lethal advantage. When you can set your own price giving people no choice but to buy,
your firm is profitable irrespective of the situation.
4. Features Of Monopoly “Cont.”
5. Restriction on entry of firms: An auxiliary feature to no close substitutes, the restriction of entry of firms in a monopoly set up is one
of the biggest factors enabling companies to create their kingdoms.
When firms cannot enter a particular industry, the already prevalent enterprises stand to benefit from that reduced competition.
Barriers to entry can be legal barriers, as in the case of industries that require licenses from the government. They can also be financial,
as in the case of the telecom industry where investment requirements empty a hole in your pockets, wallets and the bank you would
need a loan from.
4.Firm is a price maker: As the firm is a sole source of supply for the commodity, they can virtually set their own price.
Take the case of insulin in the United States, when pharma companies create a monopoly on the sale and supply of such an essential
drug required to save millions of people, they can virtually charge any rate they want and people will have to pay.
This feature is one of the strongest arguments for antitrust laws which are laws regulating the monopoly power of companies
5. Advantages of Monopoly System
A monopoly system is extremely beneficial to the business but highly detrimental to the consumers as they
are often subject to exploitation. The advantages are usually tailored in the same manner.
The advantages would be as follows:
1. High profit margins: For companies in a monopoly system, the ability to set their own price and ensure that
the product is only sold when they want allows for some ludicrous profits.
2. Low expenditure on advertisement: When a company is in a monopoly set up, its advertising and marketing
budget needs to be the bare minimum only.
The only advertising a company needs to do is make consumers aware of their product. There is no need for the
usual product feature show off or any of its accomplices in conventional advertising.
6. Disadvantage of a Monopoly System
The disadvantages, on the other hand, number into the millions. The fundamental disadvantage behind a monopoly system is that it
leaves the consumers exposed to large scale exploitation. Its disadvantages are as follows:
1.Inefficiency: Companies in a monopoly are not required to maintain the same
standards of efficiency as a company in a competitive market.
The reason being that a company in a monopoly set up is completely free from fear
of going out of business. When you're the only seller, there is no one else to steal
your business which allows these enterprises to be inefficient.
2.Exploitation: More than inefficiency, consumers will have to worry about
consumer exploitation. With prices surging and consumers not having a choice to
pay, it makes a monopoly system extremely dangerous and frankly, a little classist.
To prevent this from occurring, governments undertake competition and antitrust
laws that regulate how much of a market share a company can have as well as the
extent to which their price can go.
Editor's Notes
A monopoly refers to a market system where there is only one seller and many buyers.
سوق الاحتكار التام او المطلق يكون عند وجود شخص أو مؤسسة معينة هو المورد الوحيد لسلعة معينة. الاحتكار التام او المطلق معناه انه لا يوجد سوى بائع واحد لسلعة أو خدمة معينة ، ولا يوجد بشكل عام بديل معقول.
A market's geographical size can determine which structure exists. One company might control an industry in a particular area with no other alternatives, though a few similar companies operate elsewhere in the country. In this case, a company may be a monopoly in one region, but operate in an oligopoly market in a larger geographical area.
Egyptian Railways 100%, WE Landline 100%, Google 84% and Microsoft OS 76%