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Monopoly is that market situation where there is only one seller and many buyers. Seller sells single commodity at differentiated price and firm has a chance to earn more than normal profit.


Single sellers and many buyers: - Under this market only one seller exist but number of buyers is very large because this market offers necessary services.

Restriction on the entry and exit of firms: - Under this market there are various restrictions on the entry of new firms and the exit of existing firms.

Firms are both price maker and taker:-Under this market, there is no difference between firm and industry both are same .That’s why firms are both price taker and maker.

Price discrimination:-Under this market firms is offering a product at differentiated prices to different buyers according to their requirements.

Super normal profit:-Under this market firm has a chance to earn more than normal profit because consumers have no choices to purchases a commodity from any other seller.

Demand curve:-Under this market the demand curve is inelastic or less than one because of zero competition.

Less knowledge about the market:-Under this market both buyers and sellers are not aware of the fact from the market conditions.

Less mobility of the factors:- Under this market factors are not easily available and movable that’s why there is less mobility of factors

Less selling and transportation costs:-Under this market the selling and transportation costs is very less because of less competition.


Prices is higher so it is easy to generate surplus.

It is possible to innovate new products

High scope of research and development

There is no risk of excess production over demand

There is huge amount of capital for research

Control of natural sources:--Source of monopoly power is the control of resources that are production to goods.


Labour gets exploited very badly because when price exceeds marginal costs.

Increase in price of the product.

Monopoly cause reduction of quality of the product.


Natural monopoly: - A natural monopoly is a company which has increasing return to scales. In this type of monopoly average cost of the product shows a downward trend for the products.

Government monopoly: - In this type of monopoly firm gives the privilege to the firms to enjoy the right of being the only provider of a particular product in the market. Due to the laws and regulations formed by the government other competitors are not allowed to enter into the market.

Some other types are: - absolute monopoly, imperfect monopoly, discriminative monopoly, single monopoly, legal monopoly, technological monopoly.

Technological monopoly occurs when the product the company offers is in the form of patent and copyright.

Geographic monopoly is another type which occurs when there is only one company which offers product or services in an area.

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