MONOPOLY MARKET

Monopoly is a market structure un which there is a single seller and there are no close substitutes for the commodity it produces and there are strong barriers to entry. Thus in a monopoly market a single seller sup[plies the total output demanded and this has power to determine the price of the product. further, no substitutes are available and no firms are allowed to enter the industry.

Reasons for a monopoly:

·        *    Ownership of key raw materials or exclusive knowledge of production techniques so that no other       firms keep courage to produce the output.

·        *   Patent right for product or production method will not allow any firm to produce the output produce     by the firm.

·         *   Government licensing creates barriers to entry of foreign firms which would not encourage                   competition.

·         *   Natural monopoly i.e. the size of the market allows only one firm of optimal size to operate.

·       *    Firms limit pricing policy which creates barriers to entry usually combined with other limiting             policies such heavy advertising or continuous product differentiation.