Q12.1 Describe the monopoly market structure and provide some examples.
Q12.1 ANSWER
Monopoly is a market structure characterized by a single seller of a highly differentiated product. Because a monopolist is the sole provider of a desired commodity, the monopolist is the industry. Although the producer of every product faces at least some competition in the sense of competing for a share of the consumer's overall market basket of goods, monopolists face no effective competition from either established or potential rivals able to offer the same product. This allows the monopolist to simultaneously determine price and output levels for the firm (and the industry). Substantial barriers to entry or exit are often present, thereby deterring potential entrants and offering both efficient and inefficient monopolists the opportunity for excess profits, even in the long-run.
Examples of monopoly markets include: local telephone service (or
basic hook-up); municipal bus companies; and gas, water and electric utilities, among others.