Types of Monopoly: Pure Monopoly

Understanding Pure Monopoly

Pure monopoly occurs when there is only one seller in the market with complete control over the supply of a good or service. This type of monopoly allows the company to set low prices and maintain dominance without facing competition from other firms.

Example of Pure Monopoly

For instance, imagine Company X has developed a groundbreaking technology that enables them to produce a product at a significantly lower cost compared to their competitors. By pricing their product so low, Company X drives other firms out of the market because they can't afford to compete at such low prices.

Sanctioned Monopolies

Sometimes, governments may grant sanctioned monopolies to specific companies for various reasons, such as ensuring regulatory compliance or addressing market failures. These monopolies are permitted by the government and serve a specific purpose within the industry.

In summary, a pure monopoly exists when a company can price products so low that other firms cannot compete, giving the monopolistic company complete control over the market. On the other hand, sanctioned monopolies are granted by the government for specific reasons to address regulatory or market issues.