How does competition affect monopoly?  

Asked on by sarjo

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Put simply, competition destroys a monopoly.

Monopoly is a market structure in which there is only one seller with access to a given market.  This seller may have the monopoly because the market is naturally a monopoly or the seller may have it because there are rules that bar competition.  Either way, there is no competition in a monopoly.

If competition is introduced, the monopoly is, by definition, destroyed.  The market moves from being a monopoly to being something else, most likely a market in which there is monopolistic competition.  So, competition affects a monopoly by destroying it.

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