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A single seller

Monopoly means a single seller. It may be a person or a group of persons united together in the form of cartels, pools, trusts, syndicates, associations etc., For example: OPEC (organization of petroleum exporting countries). This monopolist will have the complete control over the supply of his products. Hence monopoly market is known as “One firm industry”.

No close substitutes

There will be no close substitutes for the products of the monopolist. No other firm in an industry will be producing a similar product. The cross elasticity of demand for the monopolist product is zero. The consumers will not have any other alternatives under monopoly. Hence in Monopoly, there will be absence of competition.

He is the price-maker

The Monopolist is the price-maker. He decides the price of his good or service. Since he is the only seller and there is no close substitute. Hence he decides the price. The consumers are either to buy the goods and services at the price fixed by the monopolist or to go without it. A monopolist has dual power – both a price maker and output adjuster. But he cannot exercise both these powers simultaneously / together, as he has no control over the market demand.

Price discrimination

A monopolist in order to attract all range of consumers, practices price discrimination. Charging different prices to the different buyers for a similar kind of product is called as price discrimination. For example: A doctor may charge ₹ 250 for richer patients and ₹100 for poorer patients for the same treatment.

Entry barriers

The entry of other firms is highly restricted in monopoly market situation. Some of the important factors which acts as entry barriers are:
  • ƒNatural factors: The nature itself has differentiated in allocating resources. For example: petroleum products are available only in Arab countries, Jute can grow only in West Bengal.
  • ƒLegal restrictions: Some companies through Law, posses the monopoly. For example: Possessing Patents, Trademarks and Copyrights etc. The reasons to issue these is to encourage innovations and creativity.
  • ƒBusiness formation: Some business firms through forming business organizations like Cartels, Pools, Syndicates, Trusts creates monopoly markets.
  • ƒInvestment factors: Some large players through their massive investments create monopoly. For instance: TATA and MITTAL have made huge investments in the production of iron and steel. Any new firm wants to enter in that field, will not be able to invest on par with them.

Existence of super normal profit

In monopoly, the seller always enjoys the super-normal profit. The price charged by him will always be more than the cost of production. Hence, he always enjoys the super-normal profit.

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