The concept of a monopoly is not merely an economic theoretical possibility. Monopolies exist in the United States. Monopolies were not declared illegal under any of the federal antitrust laws including the Sherman Act, the Clayton Act, the Robinson-Patman Act, or the Federal Trade Commission Act. A few of the many monopolies that currently exist are the U.S. Postal Service, the Organization of Petroleum Exporting Countries, various public utilities, Microsoft Corporation, Major League Baseball, Intel Corporation, and the International Longshore & Warehouse Union.
A monopoly involves artificial restriction of production by an entity having sufficient market power to do so. Economists argue that a monopoly is able to exploit the demand for a product to increase their profits at a cost to society and consumers.áááFor example, a company with a monopoly can manipulate supply of a product or service. A reduction in the level of production, which is one way to achieve higher profits, is known as "contrived scarcity."á Contrived scarcity creates inefficiency in an economy and to promote economic efficiency, various laws were passed that limit the market power of monopolies.
Monopolies are unique since the marketplace contains only one firm supplying products and services. In this situation, the company has more leverage or power to set prices than firms in more competitive industries. A monopoly can be thought of as the opposite of a perfectly competitive marketplace. Instead of many firms that produce a standardized product, in a monopoly there is a single seller of a product with no clones or close substitutes. Speaking of clones, Gary Stix (2004) explains an interesting case currently being heard in Federal court. It involves the fact that a patent is supposed to last for a predetermined period so that the knowledge contained therein eventually passes into the public domain. This case involves a patent on monoclonal antibod...