Monopoly, When a firm is the sole supplier of a particular product or service then we say that it is a monopolist.

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A. Define Monopoly

     When does a firm enjoy a dominant position in the market?

     Why is a firm enjoying a dominant position often associated with monopoly power?

B. Why is monopoly power often considered to be detrimental to the interest of     consumers?

      Are there any desirable features associated with monopoly?

      What government measures can be suitable for controlling monopoly powers.

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When a firm is the sole supplier of a particular product or service then we say that it is a monopolist.  A monopolist is able to prevent the entry of competitors by means of barriers and for whose product or service there is no very close substitute therefore no one can compete against him.    An example of this is the Water Services Corporation which is the only supplier of tap water in Malta and it is very difficult for other firms to start offering the same services because a lot of capital in terms of land, labour and machines are needed thus it will not be affordable.  Since WSC is a natural monopoly (that is since it is under monopoly  in the long-run its average costs would be lower than if it were shared between two competitors), it benefits from economies of scale and if a firm would enter the industry, and both firms would supply half the industry output, they would both face the demand curve D2 in Fig1.1. Thus there is no price that would allow them to cover costs.

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A monopoly can also be an integration of firms that have joined together to benefit from a monopoly power.  A dominant position in the market is associated with monopoly because in pure monopoly the firm is able to determine the price and when this fluctuates there will only be a small change in demand.  Not all monopolies can enjoy this benefit, for example Malta Post is a monopoly in Malta but if it had to make an high increase in the prices of its services consumers will utilize ...

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