What defines a monopoly in economic terms?

A monopoly is defined as a market structure where a single seller controls the entire supply of a product. This unique situation allows the monopolistic entity to influence prices and market dynamics significantly because there are no close substitutes available, and consumers have no alternatives. Since the monopolist is the sole provider, they can operate without competition, often leading to higher prices and reduced choices for consumers.

The key characteristics of a monopoly include high barriers to entry that prevent other firms from entering the market, a lack of competition, and the ability to set prices based on their production costs and desired profit margins rather than competitive pressures. This control over the market typically reduces consumer welfare as the monopolist can exploit their position by limiting output and raising prices.

In contrast, other options misrepresent aspects of market structures that do not align with the definition of a monopoly, such as the presence of multiple sellers or market dynamics driven solely by consumer demand. Understanding the implications of monopolistic practices is crucial for analyzing economic behavior and regulatory approaches in various markets.