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    What Is Monopoly? With Examples

    September 3, 20213 Mins Read
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    Monopoly is one of the extreme imperfect markets among cartels, Monopolistic Competition, and oligopoly because it lacks several characteristics of perfect competition and exists where a single firm dominates the industry.

    The word monopoly is a combination of two words where “mono” means “single” and “poly” means “seller.” Therefore, the market controlled by a single trader is called a monopoly market.

    Content Outline

    • Types of Monopoly
    • Features of monopoly
    • Examples

    Types of Monopoly

    • Natural Monopoly: It depends on the natural factors of the area; for example, Karnataka has a monopoly in the coffee market as the climate of Karnataka is best for coffee cultivation.
    • Social Monopoly: When the government controls the production for the common good, it is called a social monopoly.
    • Legal Monopoly: A monopoly arises from legal barriers or provisions, such as copyright; the law prohibits imitation of a design registered under a particular brand name.
    • Fiscal monopoly: The government regulates this monopoly for printing money and minting coins, etc.
    • Simple Monopoly: In this type of monopoly, merchants charge uniform fees for their products from all buyers.
    • Discriminatory Monopoly: In this type of monopoly, there is discrimination between buyers for selling similar products; different prices are charged to other buyers, just as a lawyer charges additional fees to each client.
    • Selective Monopoly: This type of monopoly is formed to avoid cut-throat competition in the market and create a group of monopolists to increase their profits.

    One of the best examples of this type of monopoly is (OPEC) Organization of Petroleum Exporting Countries.

    Also, Read How Groww Business Model Works? One of the fastest-growing stockbroking and mutual funds platforms in India.

    Features of monopoly

    • Single firm/trader: A monopoly market is occupied exclusively by a single seller or firm of a particular commodity that has no competitors in the market; the entire production of such a commodity depends on that firm or trader; therefore, they form an industry with a monopoly.
    • Cost Determining: Since the monopolist is the sole ruler of this industry, he also determines the cost of the commodity produced, and there is no one in the market as a competitor to contest his price, and the value fixed by him becomes the final price of that product to be sold in the market.
    • Price Distortion: Since the monopolist is the only trader of that commodity in the entire market, he can be biased among the customers, i.e., he can charge more from wealthy customers and less from poor customers.
    • Optimal production: Production in a monopoly market should be at an optimum level as an increase in supply may lead to a falling in the product’s price.
    • No substitute products: The monopoly firm or distributor captures an entire market for the product as it owns the patent for that product; therefore, no substitute products can be produced by other firms and sold in the market.
    • Entry Restrictions: Entry into the monopoly market is restricted for the firms as the monopolist has captured the market with its specialties; therefore, other firms cannot compete with them. The monopoly firm must have a patent to survive in the market.
    • Stability of production elements: All production elements are not always mobile, becoming one of the essential components behind monopolist domination over such resources. No one can copy such factors or combinations for production, and hence the chances of overthrowing the monopolist become negligible.
    • Precise knowledge and profit maximization: The monopolist learns ideally about the market conditions to avoid the uncertainties of the future, and his main objective is to maximize the profits of the firm

    Examples

    • Facebook has a huge monopoly in the social media business by owning Whatsapp ( Messaging King ), Instagram ( Fastest Growing App ), Messenger, Tinder, and Facebook.
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