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2. Monopoly

A Monopoly exists when a single firm dominates the market and has significant control over the price and supply of a product. Barriers to entry prevent other firms from entering the market.

Characteristics:

  • Single seller.
  • Unique product with no close substitutes.
  • Price maker (sets its own price).
  • High barriers to entry (legal restrictions, high start-up costs).

Real-Life Example:​

Utility companies (e.g., electricity providers) often have a monopoly in certain areas because the infrastructure costs create high barriers to entry for competitors.