It’s important to recognize immediately that this definition is, at best, ambiguous. This is a pretty standard definition of monopoly, especially the first part about having a product with “no good substitutes.” Other textbooks will say a product with no “close” substitutes. In the Microeconomics textbook I use for my courses (Gwartney, Stroup, Sobel, and Macpherson) the definition of monopoly is, “a market structure characterized by (1) a single seller of a well-defined product for which there are no good substitutes and (2) high barriers to the entry of any other firms into the market for that product.” ![]() What is a monopoly? Well, I think it’s important to consider the literal textbook definition. In order to answer how a free market would address monopolies, we first need to understand what a monopoly is and what a monopoly is not. “without anti-trust laws how would the free market keep monopolies from forming? If other companies could just buy smaller companies without creating innovation, how would progress happen?” On this same topic, for Ask an Economist, I received a question from AJ. ![]() In the president’s recent State of the Union address he called for “bipartisan legislation to strengthen antitrust enforcement.” For those who aren’t policy wonks, antitrust law is the law that attempts to prevent the creation of monopolies and cartels.
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