Definition of Monopoly Essay

1250 Words 5 Pages
Monopoly refers to a market structure whereby there is only a single firm operating in an economy. In markets that have one firm controlling the supply of some important products or raw materials, consumers find it difficult to purchase goods at prices that are convenient as they have to conform to whatever has been set by companies. Companies that have monopoly power set their own prices since unlike in a perfectly competitive market where operations are guided by demand and supply forces, they know that the market they serve can hardly do without them. Basically, monopoly is normally characterized by the absence of competition in the market. It is apparent that competition is always important in enhancing the welfare of consumers since …show more content…
In most cases, monopolistic firms get their power from the government so that markets do not have competition in the supply of important commodities. Moreover, there are other markets that lack government regulation thereby encouraging firms that have a sole control of the resources needed to use all the means possible to sustain their dominance. There are various examples of monopolies. For instance, there are public monopolies set by governments in some countries to facilitate the provision of vital goods and services. These include water and electricity companies that may be shielded from competition to avoid any uncertainties that may deteriorate the quality of services offered. Other examples include the local telephone service, cable television or other entities such as the US postal service. The provision of essential commodities or services by single public utilities may ensure high quality or convenience in the market to suit the needs of all consumers. Monopoly power may also be exercised by private firms that have the copyright or patent to hinder any other company from entering into the market (Simpson, 2011). Most of the private monopolistic companies that seek copyright to ensure that there are no new entrants into the market engage in technological fields. This

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