![]() However, it is worth noting that size is not one of the characteristics that define a monopoly. Generally, monopolies are known to be big businesses. It means that it can single-handedly influence the prices of products and services in the market. The entity also enjoys the liberty of setting a price to its goods and services. Generally, in a monopoly market, a single entity controls the market, and this includes determining the prices of goods and services. In addition, monopoly firms possess specific information, that other firms dont have, a situation that gives them a competitive advantage over other firms. All these factors restrict new entry into the market hence encouraging monopoly. Also, there are so many restrictions related to market entry, ranging from government license, copyright/patent, ownership of resources, as well as high costs of starting a business. That single seller becomes the sole seller of a particular product, and in most cases, there are usually no close substitutes for his product or service. In a monopoly market, competition does not exist as one seller dominates the market. Back to: ECONOMIC ANALYSIS & MONETARY POLICY How Monopolies Arise Once the competition is in the market, it gets rid of the abnormal profits that monopolists have been enjoying. In case of abnormal profits in such markets, many new firms will find their entry into the market, hence bringing stiff competition. However, under perfect competition, this becomes a rare case. Generally, the motive of monopolists is to maintain high profits in the long run. ![]() ![]() A single company can enlarge, hence dominating the entire market with a given product or service. In free-market capitalism, there are usually no restrictions. Monopoly comes into existence when there is extreme free-market capitalism. A monopoly is a term used to refer to a market structure, where one entity, like a company, dominates the market with its products or services.
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