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Monopoly (Greek, ‘sole seller’), in economics, is a market condition in which a single seller controls the supply of a product for which there are no close substitutes, and restrictions prevent new firms from entering the market. The single seller is a single, decision-making unit, for example, an individual, a firm, a cartel, etc. The monopolist may set any price, but the quantity sold at any price will be determined by the buyers\' willingness to buy.
A natural monopoly is one which exists because two or more firms operating in the market would be grossly inefficient, since a single firm faces a decreasing long-run average cost curve over the relevant range of output. One person\'s natural monopoly is another\'s anti-trust suit, but currently accepted natural monopolies would include utilities distributing electric power or telephone service in a local market. Even these ‘natural’ monopolies, however, may be threatened by future competition.
In practice, monopolies are rarely absolute. A few are enshrined in law—for example, patent and copyright laws grant temporary monopolies. In general, though, the scope for absolute monopoly is limited by near-competitors, international trade and anti-trust laws. TF
See also monopolistic competition; monopsony; oligopoly. |
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