Question

Describe the features of a monopoly.

Answer 1

(1) Single Seller and Many Buyers: In Monopoly market, there is only one seller or producer and many buyers. Monopoly firm does not have a rival in the market. So there is no competition.
(2) No Close Substitute: The commodity produced by the monopolist does not have close substitute. Hence, they do not face any competition.
(3) Entry Barriers: The fact that there is only one firm under monopoly means that other firms are restricted from entering the market. The entry barriers may be natural, legal or financial in nature.
(4) Firm Coincides with Industry: In monopoly market, the firm and industry are one and the same. In other words, there is no distinction between firm and industry.
(5) Price Maker: In monopoly the seller is a 'Price Maker', since the monopolist has control over the supply he can determine the price of his product.
(6) Profit Maximisation (super normal profit): A monopolist earns super normal profit. His decision regarding the price and the level of output are guided by profit maximisation motive.
(7) Control Over Supply: The monopolist has a complete hold over market supply as he is the sole producer.
(8) Price discrimination: This implies charging different prices for the same product to different buyers.