One seller. No close substitutes. New competitors blocked from entering. That is a monopoly, the most concentrated market structure in economics. A monopolist faces the entire demand curve and can choose the price-quantity combination that maximizes profit. The result is usually higher prices and lower output than a competitive market would deliver.

Monopolies arise for several reasons. Some are natural: it makes no sense to build two competing water networks in one city. Some are legal: patents grant temporary monopolies to encourage innovation. Some are strategic: a firm may drive rivals out of business through predatory pricing. And some are created by government license or control over a key resource.

Not all monopolies are harmful. A pharmaceutical company that spends billions developing a new drug needs patent protection to recoup its investment. A utility that serves every household in a region can achieve economies of scale that smaller rivals cannot. The policy question is not whether monopolies exist, but whether their power is checked by regulation, competition law, or the threat of new technology. Kodak, Nokia, and Blockbuster all learned that lesson the hard way.

Types of monopoly

• Natural monopoly: high fixed costs, one efficient provider
• Legal monopoly: patents, licenses, copyrights
• Coercive monopoly: barriers to entry created by the firm
• Government monopoly: state-owned or state-sanctioned