Answer in detail :
What is monopoly? Explain the features of monopoly.
Monopoly is a kind of market form which consists of only one seller or firm in the market. This single firm caters to the needs of a large number of buyers and produce a single type of good with no close substitutes of that good in the market. Also, as this is the only firm in the market, so this is also regarded as industry.
The following are the features of a monopoly:
1. Single seller/firm/industry- In a monopoly market there exist only one individual seller or a group of individuals owning a single firm. As, there is only one firm in the industry, so the firm itself is regarded as the whole industry. The sole control over the production and supply of output rests on the monopolist’s decision.
2. No close substitutes- The goods produced by the monopolist have no close substitutes.
3. Restricted entry of new firms- The entry into the monopolist market is restricted. In other words, no new firm can enter the monopoly market. There may be various legal barriers such as, patent rights, cartel laws, exclusive rights, etc. to restrict the entry of the new firms.
4. A monopolist is a price maker- Since, a monopolist firm is the single firm in the market, therefore, it enjoys full control over the price and output decisions. The monopolist has the total freedom to fix the price level, which maximises his profit. Therefore, it can be said that a monopoly firm is a price-maker.
5. Price discrimination- Price discrimination implies charging different prices for the same product from different buyers at the same time. A monopolist firm enjoys the freedom to follow price discrimination. That is, in other words, it can sell the same product to different buyers at different prices at different time periods.
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