for Teachers for Schools for Enterprise
for Teachers for Schools for Enterprise
Course Navigator
Understanding Monopolistic Competition in EconomicsNext Lesson 

What is a Monopoly in Economics? - Definition & Impact on Consumers

Chapter 7 /  Lesson 2   Transcript
Try it risk-free for 30 days

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Understanding Monopolistic Competition in Economics

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:17 What Is a Monopoly?
  • 1:23 Examples of Monopolies
  • 2:25 When Monopolies Are Okay
  • 4:14 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up

Timeline
Autoplay
Autoplay
Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and is currently working on his PhD in Higher Education Administration.

In this lesson, you will learn about monopolistic markets and what a monopoly means for producers and consumers. After this lesson, you will understand why the name of one of our all-time favorite board games really makes perfect sense.

What Is a Monopoly?

Think about the last time you played the famous board game Monopoly. What was the objective of the game? Of course it was to win, but how did you win? Whichever player ultimately controlled all of the properties on the board won the game because they had achieved a monopoly on the real estate market of Atlantic City, New Jersey. Through this famous game, the Hasbro toy company has taught millions of players what a monopolistic market looks like. When a single entity - a player in the game or a firm in the real world - controls an entire market, a monopoly exists.

Generally speaking, consumers and regulators don't like monopolies. To understand why, think back on the game. What does it mean once someone has won the game, or at least has a commanding lead? It means they have all the power. They get to start setting prices, and if someone can't pay, that person loses. That power is all fun and games in the family room, but in the real world, that much pricing power can be dangerous, especially in the markets that supply important goods and services.

Examples of Monopolies

Try to think of some examples of a monopoly in today's economy. Before you do, it should be noted that while a true monopoly means there is a single producer in the market, most regulators and economists consider a monopoly an industry that has a single firm large enough to set prices without impacting demand. Any firm can set their own prices, but most of the time, if those prices are too high, consumers don't pay them and the firm either has to lower prices or shut down. In a monopoly, consumers just have to pay whatever the controlling firm wants, since they are basically the only game in town.

So, back to the guessing game - what monopolistic markets can you think of? It's hard to think of a good example of a pure monopoly, primarily because they are discouraged, and if a U.S. firm gets too close to a monopoly, the government discourages them and puts regulations in place to limit their growth. But, that doesn't happen all of the time.

When Monopolies Are Okay

The U.S. does have some industries that are given a pass when it comes to holding a monopoly. Can you think of any? There are plenty of places to get gas. Plenty of places to buy a car. Plenty of places to watch movies. But, if you have to pay your own bills, think about your power bill. Did you get to shop around for a firm to provide your electricity, or were you told which firm you had to use? What if that firm was allowed to double their prices? Could you stop using them and start using another company? Not usually.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days
Description

Earning College Credit

Did you know… We have over 160 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Research Schools, Degrees & Careers

Get the unbiased info you need to find the right school.

Browse Articles By Category

Browse an area of study or degree level.

Recommended Articles
You are viewing lesson Lesson 2 in chapter 7 of the course:

 Back To Course

Economics 101: Principles of Microeconomics

11 chapters | 132 lessons | 18 flashcard sets

Ch 7. Market Structures in Economics
Ch 8. Scarce Economic Resource...

What is a Monopoly in Economics? - Definition & Impact on Consumers Related Study Materials

Create an account to start this course today
Try it risk-free for 30 days!
Create An Account

Explore our library of over 75,000 lessons

Browse by subject
Support