Monopoly and Oligopoly
As you learned in Chapter 4, in a free market, the dynamics of supply and demand are resolved through the price mechanism. Yet this occurs only when numerous suppliers must compete for customers, and customers bid up or bid down the price.
If there is one supplier, the result is a monopoly. If there are several suppliers, the result is oligopoly. First, we’ll examine monopoly and oligopoly, and then we’ll look at how a cartel works.
Monopoly: The Power of One
A monopoly occurs when a single producer controls the supply of a good or service that has no real substitute and where the barriers to entry are high.