Majority of the people hear the word monopoly when they are young because monopoly is a popular board game and it is played across many countries by kids; however the concept of game is taken from economics. Monopoly is the term used in the context of economics, it refers to that market structure in which there are many buyers for the particular product or service but the number of sellers are limited and therefore the company enjoy monopoly. Given below are the various features of monopoly
- Single Seller or producer of good and service – First and foremost feature of monopoly is that there is only one seller or firm who sells the product or service and due to it the firm or company can charge from customer whatever price they want, in simple words company is the price maker as opposed to a company operating in perfectly competitive market where the sellers are price takers which is decided by the market forces of demand and supply.
- Barrier to entry – Another feature of monopoly is characterized by barriers to entry which refers to those factors which make it difficult for other companies to enter into production. Some examples of barriers to entry are copyrights, patents, economics of scale, natural barrier, exclusive access to distribution channel and other such factors.
- No close substitutes – If there are substitutes available for a product then there can be no monopoly and therefore absence of substitutes is another feature of monopoly. Due to absence to substitutes consumers have no choice but buy the product at seller determined price.
- Imperfect information – Another feature of monopoly is that consumers do not have complete information and therefore they continue to pay price decided by producer or seller. An example of imperfect information will be real estate market where the buyer purchasing land will always be at disadvantage because of lack of complete information about the real worth of land.
- Abnormal profits – In monopoly firm or company enjoys abnormal profits because price for good or service is not determined by market forces of demand and supply but it is determined by the seller and therefore company continue to enjoy abnormal profits for long periods of time.