Question

Describe two characteristics of a monopoly market in brief.

Hint:

Monopolies are usually formed when there are high barriers to entry and a single firm controls the entire market supply, giving it significant pricing power.

Answer 1

A monopoly market is a market structure where a single firm dominates the entire supply of a good or service, with no close substitutes. Below are two key characteristics of a monopoly market:
Step 1: Single Seller.
In a monopoly, there is only one seller or firm that controls the entire supply of a particular product or service. This single firm has significant market power and can influence the price of the product without facing competition. The firm is the price maker, and it has the ability to set prices based on its production costs and desired profits.

Step 2: Barriers to Entry.
Monopoly markets are characterized by high barriers to entry, which prevent other firms from entering the market. These barriers can take various forms, such as high capital costs, government regulations, control over essential resources, or strong brand loyalty. As a result, potential competitors are unable to challenge the monopoly firm, allowing it to maintain its market dominance.