Conditions necessary for pure monopoly.

The following conditions are necessary for pure monopoly :

1. Single seller : There exist only one seller or producer of the product.He has control over supply of the product.Monopoly may be in the form of individual owner or join stock company.
2. Absence of close substitutes : There should not exist any close substitute of the product.Because,if there are substitutes,competition prevail and monopoly disappears.Bober opined -"As the one seller,he may be a king without a crown.The cross elasticity between the product of the monopolist and any other producer must be small if not zero.
3. Restriction on the entry of new firms : There is strong barrier in the entry of new firms.Hence the existing firm has sole control over the supply.Due to this feature,the monopolist earns abnormal profit both in the short run as well as in the long run.

The pure monopoly existing only in economics theory.Because,there cannot be only firm producing a good.Similarly,a firm is not completely free from competition of close substitutes.In modern days of free enterprises economy,even in public utilities like electricity,postal service,telephone,water supply we can find some sort of competition.In Nepal as well different sectors which enjoyed traditional monopoly like airline,electricity,water supply,postal service are rapidly breaking up due to the liberalisation policy of the government.But the study of monopoly is necessary to know the economies of regulation which is signification for business mangers.