In economics, a monopoly (from Greek monos , alone or single + polein , to sell) exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. The verb "monopolize" refers to the process by which a firm gains persistently greater market share than what is expected under perfect competition.

A monopoly should be distinguished from monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies can form naturally or through vertical or horizontal mergers. A monopoly is said to be coercive when the monopoly firm actively prohibits competitors from entering the field.

In many jurisdictions (particularly in the United States and South Korea), competition laws place specific restrictions on monopolies. Holding a dominant position or a monopoly in the market is not illegal in itself, however certain categories of behaviour can, when a business is dominant, be considered abusive and therefore be met with legal sanctions. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic constituency. The government may also reserve the venture for itself, thus forming a government monopoly.

{dQ} = P'(Q)\cdot Q + P(Q) - C'(Q)

Setting this equal to zero for maximization:

$\backslash frac\{d\; \backslash Pi\backslash \; \}\{dQ\}\; =\; P\text{'}(Q)\backslash cdot\; Q\; +\; P(Q)\; -\; C\text{'}(Q)=0$

$\backslash frac\{d\; \backslash Pi\backslash \; \}\{dQ\}\; +\; C\text{'}(Q)\; =\; P\text{'}(Q)\backslash cdot\; Q\; +\; P(Q)=\; C\text{'}(Q)$

i.e. marginal revenue = marginal cost, provided

$\backslash frac\{d^2\; \backslash Pi\backslash \; \}\{dQ^2\}\; =\; P$(Q)\cdot Q + 2\cdot P'(Q) - C(Q) < 0

(the rate of marginal revenue is less than the rate of marginal cost, for maximization). |} |}

In economics, the study of market structures under imperfect competition begins with the analysis of Monopoly. If there is a single seller in a certain industry and there are no close substitutes for the good being produced by her, then the market structure is that of a Pure monopoly. Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the good being produced, but nevertheless firms retain some market power. This is called Monopolistic competition by economists, whereas Oligopoly refers to the case where the main theoretical framework revolves around firm's strategic interactions.