6.
Explanation
A monopoly is an economic market structure in which a single seller or producer dominates the entire industry by being the sole provider of a particular product or service. In a monopoly, there is no close substitute for the product or service offered, and the monopolistic firm has significant control over the market price.
Key characteristics of a monopoly include:
1. Single Seller: A monopoly is characterized by a single firm that is the exclusive producer or supplier of a particular product or service. There are no direct competitors in the market.
2. No Close Substitutes: The product or service provided by the monopolist is unique or has no close substitutes. Consumers have limited alternatives, if any, to satisfy their needs.
3. Market Power: The monopolist has substantial market power, meaning it can influence the market price by controlling the quantity supplied. It can choose to set a price higher than the competitive market equilibrium to maximize its profit.
4. High Barriers to Entry: Monopolies often have high barriers to entry, which prevent or discourage new firms from entering the market and competing. These barriers can include legal restrictions, economies of scale, control over essential resources, and patents.
5. Price Maker: In a monopoly, the firm is a price maker rather than a price taker. It has the ability to set the price at which it sells its product or service, taking into account its profit-maximizing strategy.
6. Limited Consumer Choice: Monopolies can lead to limited consumer choice and potentially higher prices for consumers due to the lack of competition.
Conclusion: Monopolies are generally considered to be inefficient from a societal perspective because they often result in higher prices and reduced consumer surplus. To address these concerns, governments may regulate or break up monopolies, promote competition, or use antitrust laws to ensure fair market conditions and protect consumer interests.