A monopoly exists when one seller controls the entire supply of a good or service. There are no close substitutes. The monopolist sets the price. Consumers either pay or go without. This power often leads to higher prices and lower output than a competitive market would produce.

Monopolies arise in several ways. Some are natural, like a utility where building duplicate infrastructure makes no sense. Some are created by government patent or license. Others emerge from a company outcompeting rivals and then erecting barriers to entry.

Governments regulate or break up monopolies to protect consumers. Antitrust laws prohibit anticompetitive practices. Regulated monopolies, like electric utilities, have their prices set by commissions. The tension is real. A natural monopoly may be efficient, but unregulated it can exploit customers. Oversight is imperfect but necessary.

Sources of monopoly

• Control of a key resource
• Government-granted patents or licenses
• Natural monopoly from high fixed costs
• Network effects
• Predatory pricing