A monopolistic market is a market structure that has the characteristics of a pure monopoly. A monopoly exists when there is only one supplier of a good or service, but there are many consumers.
In a monopolistic market, the monopoly has full control of the market. Since it has total market control, a monopoly sets the price and supply of a good or service. This characteristic makes it a price maker. A monopoly is a profit maximizer because it can change the supply and price of a good or service to generate a profit. It can find the level of output that maximizes its profit by determining the point at which its marginal revenue equals its marginal cost.
A monopoly generally has one seller that controls the production and distribution of a good or service. This makes it very difficult for other firms to enter the market and creates high barriers to entry, which are obstacles that prevent a firm from entering into a market. Potential entrants are at a disadvantage because a monopoly has first mover‘s advantage and can set prices lower to thwart a firm’s entry.
Since there is only one supplier and firms are not able to easily enter or exit, there are no substitutes for the goods or services. A monopoly also has absolute product differentiation because there are no other comparable goods or services.