Monopoly

A monopoly refers to a type of market structure where there is only one seller or producer for a particular product.
Monopolies possess significant market power, meaning they can set both the price and quantity of the product.
The monopolist remains unmatched and unrivalled in the market because of high barriers to entry. This prevents the entry of potential competitors.
They practice price discrimination, a situation in which different prices are charged for the same product or service.

Single Seller: There is only one firm that controls the entirety of the market.
Unique Products: Products have no close substitutes, therefore, consumers have no alternatives.
Price Maker: Monopolies can set their own price as they have total market control.
High Entry Barriers: Barriers may be technical, legal, or due to absolute cost advantages which prevent new firms from entering the market.

Economies of scale: As the singular market force, a monopolistic firm can fully exploit economies of scale, leading to lower average costs.
Firms can engage in research and development (R&D), creating dynamic efficiency due to the high profits they accumulate.
Stable Prices: Monopolies often result in more stable prices within a market, as the firm isn’t subject to competitive pressure.

They can lead to allocative and productive inefficiency because of lack of competitive pressure. The monopolistic firm usually produces less and charges a higher price than in more competitive market structures.
There is a potential for abuse of market power; since the monopolist is a price maker, they can exploit consumers by raising prices and limiting consumer surplus.
They may engage in rent seeking behaviour, lobbying government for more monopoly power, which does not contribute to the wealth of society.

Regulation: The government may regulate monopolies by setting price limits to protect consumers.
Nationalisation: In certain situations, the government may take ownership of the monopoly.
Competition Policy: The government may implement policies to increase competition. Examples include breaking up monopolies and promoting small and medium enterprises (SMEs).
Trade Liberalisation: By reducing barriers to trade, governments can encourage foreign competition.