Monopoly is where one firm is the sole supplier or controls a large part of the market share. The advantages of a monopoly are: where large scale capital is required, average costs can fall if only one firm produce the goods. Monopolist will have better resources to spend on research and development and will be able to bring new techniques and products to strengthen its position. Monopoly would mean economies of scale which in turn would lead to lower priced experts. A monopolist reacts to demand changes in a more effective manner than other forms. Disadvantages of monopolies also exist. They charge higher prices as there is no other competitor in the market.

They abuse consumers in this way. Monopolist has the power to restrict market supply. It is also argued that because there is no competition monopolist have little incentive to introduce new products and techniques. Monopolies also restrict entries of new firms and drive them out of business. Moreover there is lack of choice for consumers in the market. In a monopoly firm do not respond to consumer demand. When there is competition forms supply more of what consumers demand.