In a monopoly market structure, a single firm is the sole supplier of a good or service, effectively controlling the entire market for that particular product. This firm faces no direct competition, allowing it to set prices and output levels without regard to competitors.
In a monopoly, barriers to entry are high, meaning that other companies cannot easily enter the market to provide alternatives. This leads to a situation where the monopolist can maximize profits by adjusting the price and quantity of the product supplied, often resulting in higher prices and lower output compared to more competitive markets. The lack of competition also results in less incentive for innovation and efficiency, as the monopolist does not need to improve or lower prices to attract consumers.
Understanding this concept is essential when analyzing market structures and their implications for consumers and the economy as a whole.