I.

Introduction

Monopoly, economic situation in which only a single seller or producer supplies a commodity or a service. For a monopoly to be effective, there must be no practical substitutes for the product or service sold, and no serious threat of the entry of a competitor into the market. This enables the seller to control the price.

One or more of the following elements are of great importance in establishing a monopoly in a particular industry: (1) control of a major resource necessary to produce a product, as was the case with bauxite in the pre-World War II aluminum industry; (2) technological capabilities that allow a single firm to produce at reasonable prices all the output of a particular commodity or service, a situation sometimes described as a “natural” monopoly; (3) exclusive control over a patent on a product or on the processes used to produce the product; and (4) a government franchise that awards a company the sole right to produce a commodity or service in a given area.