What is a monopoly?

By Yolander Prinzel AAA
A:

Monopoly is a fun family game, but in real life, a monopoly can be dangerous to a country's economy. A monopoly occurs when an industry or sector has only one producer of goods or retailer for certain products. For example, if you want to buy a new set of dinnerware and there is only one store from which you can purchase that dinnerware, that store will be considered to hold a monopoly. Monopolies are harmful because they allow one entity to set the price on goods without consideration for competitive, affordable pricing. This is because when there is a monopoly, there are no competitors. This leaves customers at the mercy of the monopolist.

Monopolies can occur for perfectly innocent reasons. Sometimes, a specialized industry may have certain barriers to entry that only one company or individual can meet. The U.S. has antitrust laws that help prevent companies from becoming monopolies within an industry. In the late 1990s, Microsoft faced several suits due to perceived violations of these antitrust laws. Had the Justice Department proved the company was in violation, Microsoft would have been forced to divide itself into subsidiaries in order to break up the potential monopoly.

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