Monopoly is defined as the market structure where there is a single seller of a product having no close substitutes. Thus, the monopoly market has full control over the price of the product. There are a large number of buyers and no competitors. The firm or seller can determine the price of its product. So, it can reduce the price of its products in order to increase sales or can even earn more profit by selling fewer products at a high price.
According to Anna Koutsoyiannis, “Monopoly is a market situation in which there is a single seller. There are no close substitutes of the commodity it produces, there are barriers to entry.”
Features of monopoly:
- Single seller and a large number of buyers
A monopoly firm is the only firm and industry of a monopolist. But there are a large number of buyers.
- No close substitutes
There are no substitutes which are close to the product and services sold by a monopolist.
- Entry barriers
There is a difficulty for new firms to enter into the monopoly industry. There are either natural or artificial restrictions on the entry of firms into the industry.
- It is also an industry
Under monopoly, there is only one firm which is included in the industry. So, there is no distinction between industry and firm under monopoly.
- Price maker
A monopolist has absolute control over the supply of the commodity. As monopolist is a single supplier of a product, the buyer has to pay the price fixed by the monopolist. So, he/she is the price maker.