Monopoly

Omar Mohamud

Definition and Characteristics and Issues

  1. The exclusive possession or control of a supply or trade of a commodity or service.
Characteristics
  1. This market has only one seller
  2. The products sold have no close substitute
  3. There are significant barriers to getting in or out of this market
Issues


  1. Monopolies are price makers
  2. In 1890 the Sherman Antitrust Act outlawed monopolies in the US

Examples of Monopolies

Advantages and Disadvantages

Advantages

  • Monopoly avoids duplication and hence wastage of resources.
  • A monopoly enjoys economics of scale as it is the only supplier of product or service in the market. The benefits can be passed on to the consumers.
  • Due to the fact that monopolies make lot of profits, it can be used for research and development and to maintain their status as a monopoly.


Disadvantages

  • Poor level of service.
  • No consumer sovereignty.
  • Consumers may be charged high prices for low quality of goods and services.
29. Monopoly Basics