{"id":4765,"date":"2020-05-18T14:50:08","date_gmt":"2020-05-18T14:50:08","guid":{"rendered":"https:\/\/www.homeworkjoy.com\/infographics\/?p=4765"},"modified":"2022-09-28T01:51:08","modified_gmt":"2022-09-28T08:51:08","slug":"definition-of-monopoly-in-economics-economics-help","status":"publish","type":"post","link":"https:\/\/www.homeworkjoy.com\/infographics\/definition-of-monopoly-in-economics-economics-help\/","title":{"rendered":"Definition of Monopoly in Economics | Economics Help"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The word monopoly is the combination of two words: Mono and Poly where mono refers to a single and poly to control. The definition of monopoly in economics is defined as the only seller of the product, which means a 100% market share. If a company has more than 25 % of share in the market, then it will be in a monopoly. For example, Google has 90% of search engine traffic. Then it is in monopoly. Thus a market structure is characterized by a single seller who is selling a different product in the monopoly market.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In a monopoly market, the seller is the sole seller of goods with no close substitute as he faces no competition due to monopoly. The seller enjoys the power of setting the price for his goods. The<\/span> <strong><a href=\"https:\/\/www.homeworkjoy.com\/blog\/offers\/what-is-the-elasticity-of-demand-an-overview\/\">elasticity of demand<\/a><\/strong><span style=\"font-weight: 400;\"> is different at different points on a firm\u2019s demand curve.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Disadvantages of Monopoly<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">Higher Prices in Monopoly<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In a monopoly market, there is only one supplier and may consumers. Thus firms who are in a monopoly enjoy the power of higher prices due to the lack of competition.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Allocative and Productive inefficiency<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">When a firm is in monopoly, it creates allocative inefficiency because they charge high prices, but they don\u2019t have enough supply. Also, the firm will always be in productive inefficiency because monopolist does not produce at minimum average cost. The prices reflect demand but in case of monopoly price is always higher than marginal cost.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Supernormal Profit\u00a0<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Large firms practice this to earn the supernormal profit, which is a disadvantage to the economy. It means that different prices are charged for the same product. However, it is against the interest of consumers.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Higher Rates to Suppliers<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In the monopoly, a firm may use its market power and profit power to the suppliers. For example, supermarkets pay less money to the farmers since farmers have little opportunities to sell. But supermarkets have a whole large market.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Lack of Choice<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Consumers in the monopoly face the issue of lack of choice as there are only one seller and many consumers. Suppose if a customer is not happy with the price tag or find it costly, then he has no alternative except not to buy that product.\u00a0\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Advantages of Monopolies<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">Higher Profits<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Since there are no other firms to sell the product, thus firms enjoy a higher profit in the market. This profit can be used for several different purposes in the economy.\u00a0\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Innovation<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">It increases the urge to launching something new in the market. Thus monopoly serves the purpose of encouraging innovators.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So it was the complete definition of monopoly in economics. If you need any help in economics, then you can get instant<\/span><strong> <a href=\"https:\/\/www.homeworkjoy.com\/economics-help\/\">Economics homework help<\/a><\/strong><span style=\"font-weight: 400;\"> from our experts.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The word monopoly is the combination of two words: Mono and Poly where mono refers to a single and poly to control. The definition of monopoly in economics is defined as the only seller of the product, which means a 100% market share. If a company has more than 25 % of share in the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4766,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[218],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.2.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Definition of Monopoly in Economics | Economics Help<\/title>\n<meta name=\"description\" content=\"Learn the definition of monopoly in economics. 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