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Monopoly

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A monopoly is when one company dominates the market for a particular good or service.

There are two ways a monopoly can occur. A monopoly occurs when no other company is providing that same good or service. A monopoly also occurs when there is a single company that commands a significant majority of market share and thereby dominates the market for a particular good or service.

Since a monopoly has little or no competition, it has less reason to stay efficient or innovative. Usually there will be barriers of entry that keep other companies from entering the market and disrupting the monopoly. Legal barriers, including patents, place restrictions on other companies trying to enter the market. If a monopoly holds a patent on a good, no other company can sell that good, and the monopoly can stay a monopoly as long as it wishes. A natural barrier occurs if the startup cost is too high, or if the market would always give advantage to the original monopoly.



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