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Monopoly

History, Government Regulation, Exemptions, Further Readings



An economic advantage held by one or more persons or companies deriving from the exclusive power to carry on a particular business or trade or to manufacture and sell a particular item, thereby suppressing competition and allowing such persons or companies to raise the price of a product or service substantially above the price that would be established by a free market.



In a monopoly, one or more persons or companies totally dominates an economic market. Monopolies may exist in a particular industry if a company controls a major natural resource, produces (even at a reasonable price) all of the output of a product or service because of technological superiority (called a natural monopoly), holds a patent on a product or process of production, or is otherwise granted government permission to be the sole producer of a product or service in a given area.

U.S. law generally views monopolies as harmful because they obstruct the channels of free competition that determine the price and quality of products and services that are offered to the public. The owners of a monopoly have the power, as a group, to set prices, to exclude competitors, and to control the market in the relevant geographic area. U.S. ANTITRUST LAWS prohibit monopolies and any other practices that unduly restrain competitive trade. These laws are based on the belief that equality of opportunity in the marketplace and the free interactions of competitive forces result in the best allocation of the economic resources of the nation. Moreover, it is assumed that competition enhances material progress in production and technology while preserving democratic, political, and social institutions.

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