Question

Explain any four features of monopoly

Answer 1

A monopoly is a type of imperfect market structure. The term ‘Monopoly’ is derived from the Greek word ‘Mono’ which means ‘Single’ and ‘Poly’ which means ‘Seller’.

In a monopoly, there is only one seller who controls the entire market supply for a product that has no close substitute.

According to Chamberlin, “Monopoly refers to a single firm, which has control over the supply of a product which has no close substitute.”

The following are the features of monopoly:

1. A Single Seller: In a monopoly, there is a single producer or seller in the market, i.e., a monopolist. The monopolist faces no competition from any other producer as he is the sole seller. But, the number of buyers is large.

2. Price Maker: In a monopoly, the seller himself fixes the price. He has complete control over the supply and there is no close substitute for his product. So, he can charge any price for the product. Therefore, the monopolist is the “price maker”.

3. Entry Barrier: Entry of the rivals is restricted due to legal, natural, and technological barriers which do not allow the competitors to enter the market.

4. No Close Substitute: The product sold by the monopolist is unique. There is no close substitute available for that product in the market. So, the buyers have no choice. They either have to buy the product from the monopolist or go without it. The cross elasticity of demand for the monopolist’s product is either zero or negative.

5. Complete control over the market supply: The market is completely controlled by the monopolist. He is the only one who manufactures or sells the goods.