monopolistica

Monopolistica is an economics term used to describe market conditions in which firms hold market power either as a single seller or through differentiated products. It covers two related structures on a spectrum: monopoly, where a single firm dominates the market, and monopolistic competition, where many firms offer differentiated products and each has some price-setting ability.

A monopoly exists when one firm is the sole supplier of a good or service with no close substitutes and significant barriers to entry. The monopolist faces the market demand curve and sets price to maximize profit, often resulting in higher prices and lower output than in competitive markets. Examples include natural monopolies such as utilities, or markets protected by patents or exclusive licenses.

Monopolistic competition features many firms, product differentiation, and some price-setting power. Each firm faces a downward-sloping demand curve for its own product, but freedom of entry and exit in the long run drives economic profits toward zero. Firms compete not only on price but also on branding, quality, and advertising.

Policy and welfare considerations: both monopolistic and monopolistic competition can reduce social welfare relative to perfect competition, though the mechanisms differ. Monopoly can produce large welfare losses due to output restriction; monopolistic competition involves excess capacity and advertising costs. Regulators may rely on antitrust enforcement, pricing rules, or intellectual property policies to curb excessive market power while balancing incentives for innovation.