Exclusively controlled by one group of the means of producing or selling a commodity or service.According to Webster, to have a monopoly is to have exclusive ownership, possession, or control. A monopoly is defined as a market in which there is one and only one firm supplying a good or service. For a monopoly to be effective there must be no practical substitutes for the product or service sold, and no serious threat of the entry of a competitor into the market. This enables the seller to control the price.
A competitive market consists of many buyers and sellers. Markets thrive because an equilibrium price is established through natural competition and no single buyer or seller can affect that price. Instead both buyer and seller must take the price given by the market based on the dynamics of supply and demand. This competition is healthy and necessary to the economy because it regulates price, production, promotes and motivates innovation and improvement. In comparison, a monopoly dictates its price and quantity based on demand. It has the potential to influence prices and does so to increase profits. Regarding production, a monopolist produces below the demand curve in order to charge higher prices to consumers.
There are four market structures; perfect competition, pure monopoly, monopolistic competition and oligopoly. These four each have their own distinct, and in some cases, similar characteristics. In this paper, I will highlight these characteristics and depict and explain each of the pricing strategies, demand and cost curves. However, the true reason for doing so is to distinguish each market structure from the other to truly understand how a firm makes it pricing and supply decisions, and how these decisions affect the firm in both the short and long run. Other types of monopolies are defined by their markets. There are regional monopolies, like electric power companies. In most markets, consumers cannot choose their power...