Short Notes on “Monopoly Market Form”

Monopoly is a market form, which has always attracted the attention of economists. This word has come from the Greek words, monos (single), polein (selling), which mean alone to sell. Therefore, in literary terms, it implies a market structure, where there is a single seller.

In economic theory, monopoly is characterised by sole producer selling a distinct product for which there are no close substitutes and there are strong barriers to entry. This sole producer (may be known as monopolist) controls the entire supply of the market.

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Thus, the supply curve of the firm and the industry will be one and the same. Under these circumstances, the monopolist will tend to have complete control over the price of the product sold by him. That is why, monopolist is a price maker rather than a price taker and he need not fear the actions and reactions of rivals, at least in the near future.

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In other words, the monopolist operates unfettered by the competition of rivals. The level, up to which the monopolist can raise the price, depends upon the elasticity of demand, while cost conditions determine the level, down to which the monopolist can lower the price.

In monopoly, the distinction between the firm and industry (so important under perfect competition) is not there. The monopolist firm is not only a firm; it also constitutes the whole industry. It is the only firm producing the product in question.

The firm, thus, takes on the characteristics of the industry and has a demand (average revenue) curve, which slopes downward just as the demand curve for the product of an industry. The demand curve of the monopolist coincides with the industry demand curve. Its slope represents the extent of control of the monopolist over the price of the product.


It may be possible to cite few examples of monopoly, though the case of pure or absolute monopoly may be as rare as pure or perfect competition. However, the element of monopoly is there in almost every industry.

It can be over whelming in the case of public utilities like supplying drinking water, gas, electricity, transportation, communication, etc. Further, pure monopoly provides an important benchmark against which to compare less extreme forms of monopoly power.

Pure monopoly implies complete absence of competition both in the short-run as well as long- run, while under perfect competition, the competition is complete. In the actual world, there is neither pure monopoly nor perfect competition.

Between these two extreme opposite limiting cases, lie various real intermediate market situations like monopolistic competition, oligopoly, duopoly, (increasing order of degree of monopoly and hence imperfections). These market forms differ from each other in respect of degree of imperfections.


These market structures can be discussed and studied in details under different chapters. In the present chapter, the principles underlying the equilibrium determination under monopoly (simple as well as discriminatory monopoly) have been explained.


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