MONOPOLY

WHAT IS MONOPOLY

• A market structure characterized by a single seller, selling a unique product in the market.
• Seller faces no competitors
• The sole seller of goods with no close subsitutes

PROBLEM OF MONOPOLY

• Restricting output onto the market.
• Charging a higher price than in a more competitive market.
• Reducing consumer surplus and economic welfare.
• Restricting choice for consumers.
• Reducing consumer sovereignty.

TYPES OF MONOPOLY

• Natural monopoly
• Pure monopoly

NATURAL MONOPOLY

• Exist as a result of high fixed or start up cost
• Of operating a business in a particular industry
• Example: gas network,railway infrastructure

PURE MONOPOLY

• Exists when a single firm is the
• Sole producer of a product which no subsitutes
• Examples:public utilities, professional sport leagues