The word Monopoly is derived from the Greek word 'Mono' which means one and ''poly'' means the seller. Therefore Monopoly is a market structure where there is a single seller or producer. There are no substitutes for the product produced by the monopolist in the market.
The seller, begin the sole seller, has full control over the supply of the goods. Seller is a price marker under Monopoly. Since the firm is a price maker, the price can be increased or decreased due to the sole right in the supply of the commodity.
According to A. Koutsoyiannis - " Monopoly is a market situation in which there is a single seller, there are no close substitutes for the commodity it produces, there are barriers to entry."
Causes leading to the formation of monopoly
There are many reasons which cause the formation of a monopoly. Some of them;
1.Merger or takeover; Monopoly may be created due to Merger and takeover. The merger means to make a group of different sellers as one firm whereas take over is buying of other small firms buy one firm.
2. Patent rights; patent rights are rights that are given by the government to a firm to produce a commodity of specific quality and character. Search rice to the firm creates a monopoly.
3. Legal restrictions; rules and regulations of government also create Monopoly. We can see a government Monopoly in water supply, electricity, petroleum products, etc. which is due to Government law.
4. control oversupply of inputs; A monopoly situation may arise due to control of a firm over the supply of initial inputs like raw materials, skilled labor, Technology, etc.
5. Rival Rewa Firms Eliminated; pressure tactics and unfair means by a giant firm may lead to the elimination of rival firms from the industry to secure a sole position of the giant firm.
6. Market size; the size of the market may be such as to support a single firm of the optimum size. In search of the firm becomes a Monopoly firm.
7. A large amount of capital; the manufacture of some goods requires a large amount of capital. all firms cannot enter the field because they cannot afford to invest such a large amount of capital. This may give rise to Monopoly.
Characteristics of monopoly market
The following are the major characteristics of a monopoly market.
1. Singer Seller; there is only one seller but many buyers. A single firm is the only producer of a given product for the sole supplier of the product.
2. No close substitutes; there are no close substitutes of the product produced by the Monopolist in the market. This means you can not exist in the market if there are close substitutes for the product produced by the monopolist.
3. Strong Barriers to Entry; there are strong berries to the entry of new firms. The extension of monopolar depends on the acceptance of the barrier. They may be with various types of barriers to entry such as legal, economic, technological, and other obstacles.
4. Price maker; in monopoly, a firm has full control over the supply of the product. The firm is in a position to fix the price. So, the firm is a price maker.
5. One firm industry; there is only one firm, the firm itself is an industry. The distinction between the firm and the industry doesn't exist in a monopoly.
6. Price discrimination; A monopolist charge different prices from different customers for the same quantity of the commodity in different markets. Price discrimination is the practice of a monopolist to charge different prices to different customers for the same commodity.
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