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Monopoly

Posted on August 16, 2019 by Jennifer Spencer

Monopoly is a market situation in U.S. Antitrust law where a single firm achieves an overwhelming dominance in a particular market such that it can exclude new market entrants. By this definition, when a company possesses 70% of the market, a monopoly market can be declared to exist; what matters is the ability to exclude new entrants. Contrary to a widespread impression, mere possession of a monopoly market is not illegal; for example, copyrights and patents are state-guaranteed monopolies of limited duration. Governments sometimes determine that the public’s best interest is served by declaring a legal monopoly, which is then carefully regulated to prevent abuses. See antitrust.

Technipages Explains Monopoly

The word monopoly is derived from the combination of two words, i.e., ‘Mono’ and ‘Poly’. ‘Mono’ refers to a single and ‘Poly’ to control. In this way, a monopoly refers to a market situation in which there is only one seller of a commodity such that the seller controls the price and availability of commodity in the market.
There are no close substitutes for the commodity it produces, and there are barriers to entry. The single producer may be in the form of an individual owner or a sole partnership or a joint-stock company. In other words, under a monopoly, there is no difference between firm and industry.
The monopolist has full control over the supply of a commodity. Having control over the supply of the product he possesses the market power to set the price. Thus, as a single seller, the monopolist may be a king without a crown. If there is to be a monopoly, the cross elasticity of demand between the product of the monopolist and the product of any other seller must be minimal.
Most governments seek to always control monopolies by placing price controls, taking over ownership of such firms, division of such forms into smaller more competitive organizations. However, the government sometimes instigates monopolies for the sake of national security to achieve scales of economies that compete internationally.

Common Uses of Monopoly

  • A political scandal of the tobacco monopoly led to its downfall
  • It is undeniable that Johnson and Johnson are in a monopoly market when it comes to baby products
  • Monopoly is a market situation that affords a single company or organization determine the market criteria of a product

Common Misuses of Monopoly

  • When it comes to the manufacturing of cutting edge smartphones, iPhone enjoys a monopoly market

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