Conditions for Monopoly In a perfectly competitive market, there are many firms, none of which is large in size. In contrast, in a monopolistic market there is only one firm, which is large in size. This one firm provides all of the market's supply. Hence, in a monopolistic market, there is no difference between the firm's supply and market supply. Three conditions characterize a monopolistic market structure. First, there is only one firm operating in the market. Second, there are high barriers to entry. These barriers are so high that they prevent any other firm from entering the market. Third, there are no close substitutes for the good the monopoly firm produces. Because there are no close substitutes, the monopoly does not face any competition. Barriers to entry. A barrier to entry is anything that prevents firms from entering a market. Many
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This note was uploaded on 11/19/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.