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Types of monopoly
Explain the types of Monopoly.
Monopoly is a type of imperfect market structure. In a monopoly, there is only one seller who controls the entire market supply for a product that has no close substitute.
The following are some of the types of monopolies:
Pure, perfect, or Absolute Monopoly: A pure or perfect monopoly means that the firm controls the supply of a product for which there is not even a remote (close) substitute. Such a monopoly is very rare.
Natural Monopoly: The monopoly created on the basis of natural conditions like climate, rainfall, specific location, etc. is known as a natural monopoly.
- Legal monopoly: It arises due to legal protection given to the producer in the form of patents, trademarks, copyrights, etc. The law prevents potential competitors from producing identical products.
- Technological monopoly: Big firms enjoy technological monopoly due to their superior technology and economies of scale. Other firms that do not have the access to such technology cannot produce the quality goods produced by big firms.
- Simple monopoly: In a simple monopoly the firm has monopoly power over a product or service, but it charges a uniform price to all the buyers.
- Discriminating monopoly: In a discriminating monopoly, the firm charges different prices to different buyers in the same market or in different markets for the same product.
- Private monopoly: When an individual or a private firm controls the production it is regarded as a private monopoly.
- State or Social Monopoly: When the government owns and controls the production of a good or service it is called a state or social monopoly.