Monopoly is a term of economic theory and practice. It is the opposite of perfect competition. This is a situation where a single product or service is provided by only one company.
Monopoly in practice: Because there is no price competition on the supply side in the monopoly, a monopoly producer can charge a higher price than if there were more producers.
If the market demand is satisfied for its production by one firm with lower average cost, than if there were more companies in the industry, it is a natural monopoly.
Abuse of monopoly position may be the reason for the state to intervene in the form of:
- Price regulation
- Tax increase
- Antitrust laws
- Other forms of economic regulation