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Question
Answer the following question.
Elaborate three main features of a monopoly form of market.
Solution
The features of a monopoly form of the market are given as follows:
- Single seller/firm/industry - In a monopoly market there exist only one individual seller or a group of individuals owning a single firm. As, there is only one firm in the industry, so the firm itself is regarded as the whole industry. The sole control over the production and supply of output rests on the monopolist’s decision.
- Restricted entry of new firms - The entry into the monopolist market is restricted. In other words, no new firm can enter the monopoly market. There may be various legal barriers such as, patent rights, cartel laws, exclusive rights, etc. to restrict the entry of the new firms.
- A monopolist is a price maker - Since a monopolist firm is a single firm in the market, therefore, it enjoys full control over the price and output decisions. The monopolist has the total freedom to fix the price level, which maximises his profit. Therefore, it can be said that a monopoly firm is a price-maker.
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RELATED QUESTIONS
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Answer in detail
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