The word monopoly comes from the Greek '' monopolein '', its lexical components are '' mono '' which means only, isolated, unique and '' polein '' which is to sell. The word monopoly is a situation of legal advantage or market failure, which is what describes the situation that occurs when the supply makes a market for an inefficient good or service, in which there is a monopoly producer who can obtain a large market power and it is the only company in the given industry that obtains a specific and differentiated product, good, resource or service.
For a monopoly to exist, it is necessary that there are no substitute products in the market, that is, that there is no other good that can replace the given product and thus consumers will have no alternative to buy it.
There are three types of monopoly such as natural monopoly, pure and monopsony.
The natural monopoly arises in a fluid way and becomes the leader in the production of this service, the monopoly cannot control prices, but must accept certain limits such as potential competition, permanent competitive factor, elasticity of demand, the substitute etc.
The Pure monopoly is a single company in an industry that can produce and distribute a product in a market where there are many buyers who are consumers, but in the real economy it does not occur, except in the case of an activity that can transfer by a public operation.
The monopsony, is the only company in the formed industry for a single buyer and many sellers, the company has to pay a price high for the last unit of a set of goods used to produce other goods and on the acquired units, This company faces the demand curve that a monopolist faces, it will be more elastic to the extent that substitutes for the article are more numerous and obtain lower prices.
