There are four basic types of market structures in traditional economic analysis: perfect competition, monopolistic competition, oligopoly and monopoly. In a general equilibrium context, a good is a specific concept including geographical and time-related characteristics. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group.

Elasticity of demand: In a complete monopolistic market, the demand curve for the product is the market demand curve. Most studies of market structure relax a little their definition of a good, allowing for more flexibility in the identification of substitute goods. Barriers to exit are market conditions that make it difficult or expensive for a company to end its involvement with a market. If there is a downward-sloping demand curve then by necessity there is a distinct marginal revenue curve.With a monopoly, there is great to absolute product differentiation in the sense that there is no available substitute for a monopolized good. Then the total revenue curve is TR = a y − b y 2 {\displaystyle {\text{TR}}=ay-by

This is the main way to distinguish a monopolistic competition market from a perfect competition market. Decreasing costs coupled with large initial costs, If for example the industry is large enough to support one company of minimum efficient scale then other companies entering the industry will operate at a size that is less than MES, and so cannot produce at an average cost that is competitive with the dominant company. Therefore, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry. Otherwise, other firms can produce substitutes to replace the monopoly firm's products, and a monopolistic firm cannot become the only supplier in the market.A monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell'), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a specific person or enterprise is the only supplier of a particular thing. Control of natural resources: A prime source of monopoly power is the control of resources (such as raw materials) that are critical to the production of a final good. Barriers to entry: Barriers to entry are factors and circumstances that prevent entry into market by would-be competitors and limit new companies from operating and expanding within the market. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. In other words, the more people who are using a product, the greater the probability that another individual will start to use the product.

And if the long-term average cost of the dominant company is constantly decreasing [ clarification needed], then that company will continue to have the least cost method to provide a good or service. Holding a dominant position or a monopoly in a market is often not illegal in itself; however, certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant.

Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate (e.

There is a direct relationship between the proportion of people using a product and the demand for that product. Technological superiority: A monopoly may be better able to acquire, integrate and use the best possible technology in producing its goods while entrants either do not have the expertise or are unable to meet the large fixed costs (see above) needed for the most efficient technology. While monopoly and perfect competition mark the extremes of market structures [16] there is some similarity.

A monopoly can preserve excess profits because barriers to entry prevent competitors from entering the market. The number of companies in the market: If the number of firms in the market increases, the value of firms remaining and entering the market will decrease, leading to a high probability of exit and a reduced likelihood of entry. If the demand curve shifted the marginal revenue curve would shift as well and a new equilibrium and supply "point" would be established. Intellectual property rights, including patents and copyrights, give a monopolist exclusive control of the production and selling of certain goods. The boundaries of what constitutes a market and what does not are relevant distinctions to make in economic analysis.