2. I. A monopoly refers to when a company
and its product offerings dominate a
sector or industry.
II. Monopolies typically have an unfair
advantage over their competition since
they are either the only provider of a
product or control most of the market
share or customers for their product.
III. Although monopolies might differ from
industry-to-industry, they tend to share
similar characteristics that include
What is Monopoly ?
HIGH
BARRIER
OF ENTRY
ECONOMICS
OF SCALE
SINGLE
SELLER
Price
Maker
3. COMPETITORS ARE NOT ABLE TO ENTER THE
MARKET, & THE MONOPOLY CAN EASILY PREVENT
COMPETITION FROM DEVELOPING THERE FOOT
HOLD IN AN INDUSTRY BY ACQUIRING THE
COMPETATION
THERE IS ONLY ONE SELLER ON THE MARKET,
MEANING THE COMPANY BECOMES SAME AS THE
INDUSTRY IT SERVES.
4. THE COMPANY THAT OPERATES THE MONOPOLY
DECIDES THE PRICE. OF THE PRODUCT THAT IT WILL
SELL WITHOUT ANY COMPETATION KEEPING THEIR
PRICES IN CHECK. AS A RESULT MONOPOLIES CAN
RAISE PRICES AT WILL.
A MONOPOLY CAN OFTEN PRODUCE AT A LOWER COST THAN OFTEN COMPANIES.
MONOPOLIES CAN BUY HUGE QUANTITIES OF INVENTORY, FOR EXAMPLE USUALLY
A VOLUME DISCOUNT. AS A RESULT A MONOPOLY CAN LOWER ITS PRICES SO
MUCH THAT SMALLER COMPETITATOR CAN’T SURVIVE. ESSENTIALLY MONOPOLIES
CAN ENGAGE IN PRICE WARS DUE TO THE SCALE OF THEIR MANUFACTURING &
DISTRIBUTION NETWORK SUCH AS WARE HOUSING & SHIPPING, THAT CAN BE
DONE AT LOWER COST THAN ANY OF COMPETITOR IN INDUSTRY.
5.
6. MONOPOLY is the
market where there is
only a single seller
who the only owner of
the firm
10. ENTRY OF A NEW FIRMS IS RESTRICTED
THROUGH BARRIERS LIKE.
ECONOMICS
OF SCALE
CONTROL
OVER
PHYSICAL
RESOURCES
TRADE
MARK
PREDETOR
PRICING
COPYRIGHT
PATENT
11. THE DIAGRAM SHOWS HOW MONOPOLY IS ABLE TO
MAKE SUPER-NORMAL PROFITS IN LONG RUN
BECAUSE THE PRICE (AR) IS GREATER THAN AC.
AR>AC
12. USUALLY SUPERNORMAL PROFIT
ATTRACTS NEW FIRMS TO ENTER THE
MARKET
BUT THERE
ARE BARRIER
TO ENTRY IN
MONOPOLY
IN LONG RUN IN
MONOPOLY
PRICE & PROFITS
CAN REMAIN
HIGH.
