What is a Monopoly?

A monopoly situation in which a single ……………….. or group owns all or nearly all of the market
for a given type of product or service. By definition, monopoly is characterized by an absence
of competition, which often results in ……………… prices and inferior products. According to a
strict academic definition, a monopoly is a market containing a single ………………….. . In such
instances where a single firm holds monopoly power, the company will typically be forced to
divest its ……………………. . Antimonopoly regulation protects free markets from being
dominated by a single entity. A pure monopoly is a single ………………… in a market. For the
purposes of regulation, monopoly power exists when a single firm controls 25% or more of a
particular market. Governments may grant a firm monopoly …………………, such as with the Post
Office, which was given monopoly status by Oliver Cromwell in 1654. The Royal Mail Group
finally lost its monopoly status in 2006, when the market was opened up to competition. A
monopoly could be created following the merger of two or more firms. Given that this will
reduce competition, such mergers are subject to close ………………… and may be prevented if
the two firms gain a combined market share of 25% or more. For example, if you want to buy a
new automobile and there is only one brand from which you can purchase your car, that brand
will be considered to hold a monopoly. Monopolies are …………………… because they allow one
entity to set the price on goods without consideration for competitive, affordable pricing. This
is because when there is a monopoly, there are no competitors. This leaves customers at the
mercy of the monopolist. In the late 1990s, Microsoft faced several suits due to perceived
violations of these ………………………. laws. Had the Justice Department proved the company was
in violation, Microsoft would have been forced to divide itself into subsidiaries in order to
break up the ……………………. monopoly. This is happening with Google in Europe at present and
the most well-known case was in the US when the government forced the telephone
companies to break into several regional …………………….. called “baby bell".

By Barry Norman, Investors Trading Academy