State and describe main features of a monopolist.
State and describe main features of a monopolist.
Following are the three main features of monopoly:
(i) A single seller
(ii) No close substitutes of the product
(iii) No freedom of entry of new firms
Let us discuss these features in detail:
(i) A single seller: The first main feature of monopoly is that there is only one seller of the commodity in the market with the reason that there is no distinction between industry and firm. The monopolist itself is the industry and has full control over the supply of the commodity The monopolist may be an individual, a firm or a group of firms, or a government corporation or even the government itself. Against a single seller, there can be any number of buyers.
(ii) No close substitutes of the product: The second feature of monopoly is that the product sold by the monopolist has no close substitutes and does not face any competition. Even if substitutes are avaliable, they are far from perfect. The consumers will have to buy the commodity from the monopolist or choose not to buy it at all.
(iii) No freedom of entry of new firms: The third feature of monopoly is that there is no freedom for new firms to enter the industry. It may be done to government order. For example, production of some public goods like electricity, water supply etc. is the monopoly of the government. Another reason behind the denial of freedom is patent laws. Those who develop new products are granted patent rights. An author may have copyright of his book, a firm may patent a particular design etc. which results in a monopoly over that product for at least a while.
Following are the three main features of monopoly:
(i) A single seller
(ii) No close substitutes of the product
(iii) No freedom of entry of new firms
Let us discuss these features in detail:
(i) A single seller: The first main feature of monopoly is that there is only one seller of the commodity in the market with the reason that there is no distinction between industry and firm. The monopolist itself is the industry and has full control over the supply of the commodity The monopolist may be an individual, a firm or a group of firms, or a government corporation or even the government itself. Against a single seller, there can be any number of buyers.
(ii) No close substitutes of the product: The second feature of monopoly is that the product sold by the monopolist has no close substitutes and does not face any competition. Even if substitutes are avaliable, they are far from perfect. The consumers will have to buy the commodity from the monopolist or choose not to buy it at all.
(iii) No freedom of entry of new firms: The third feature of monopoly is that there is no freedom for new firms to enter the industry. It may be done to government order. For example, production of some public goods like electricity, water supply etc. is the monopoly of the government. Another reason behind the denial of freedom is patent laws. Those who develop new products are granted patent rights. An author may have copyright of his book, a firm may patent a particular design etc. which results in a monopoly over that product for at least a while.
