Question

Mention two features of monopoly.

Explain three main features of monopoly.

State two important characteristics of monopoly.

Explain the main characteristics of a monopoly.

Answer 1

The main features of monopoly are as follows.

1. Single Seller and large number of buyers: Under monopoly, there is only one seller or firm or manufacturer of a commodity. The product sold by the monopolist may or may not be homogenous. The existence of single seller of one product eliminates the difference between the firm and the industry. There can be any number of buyers under monopoly.
2. No Close Substitutes: A second feature of monopoly is that there are no close substitutes available of the product sold by the monopolist. A pure monopoly exists only when there is no close substitute of the product sold by the monopolist. Indian railways is another example of monopoly.
3. Restriction on the Entry of New Firms: Under monopoly, new firms cannot enter the industry. There are strong barriers that prevent new firms to enter the industry. These barriers may take several forms such as patent rights government license, economies of scale etc. Thus, a monopolist faces no competition and earns abnormal profit in the long run.
4. Firm is a Price-Maker: Due to strong barriers to the entry of new firms into the industry, the monopoly firm has full control over the supply of its product. Therefore, it has full control over its price also. It can influence the market price by varying its supply.
5. Price Discrimination: The act of selling the same product at different prices to different buyers is known as price discrimination. A monopolist can charge different prices from his different buyers easily. If a monopolist adopts a policy of price discrimination, the situation is called discriminating monopoly.