A monopoly is a market structure in which there is only one producer/seller for a product or service. In other words, the single business is the industry. That individual producer/seller has the power to influence the market prices and decisions. In a very extreme case, a monopolist could be the only owner and seller of a product or service in an industry. A monopoly has an enormous amount of buyers and it has no big competitors what so ever. This is because it has the power to destroy competition. A monopoly controls the prices of the goods and is the price maker as well. Unlike in a perfect competitive market, consumers/customers in a monopolistic market do not have perfect information on the products or services they buy. Consumers have limited choices and have to choose from what it is supplied. The monopolist asserts all the power while the consumers are left with no choice. For example: Imagine if Comcast was the only mass-media company that was able to supply cable TV. If anybody would want to watch TV, they would need to purchase Comcast’s cable service at any given price, as it would be the only cable TV provider.
There are advantages and disadvantages of a monopoly. One advantages is big profits. A monopoly enjoys economics of scale, as it is the only supplier of a produc...
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...ncompetitive compared to other firms. If firms cut price then they would gain a big increase in market share, however it is unlikely that firms allow this. If this occurs, as a result to that, other firms will follow and cut price as well. Demand will only increase by a small amount: demand is inelastic for a price cut.
In a nutshell, monopoly and oligopoly are two market structures that might have their differences but they definitely share similarities. In both of the market structures, there are dominant firms who have control over the markets they operate in. both structures need high to entry barriers for them to exist. Monopolistic and Oligopolistic firms are very large and they both produce a large amount of profit. Advantages and disadvantages coexist in both market structures, but ultimately that is the reason why they both differentiate from each other.
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