In a monopoly, how is the competition characterized?

In a monopoly, competition is characterized by the presence of a single seller in the market that provides a unique product or service, which does not have any close substitutes. This means that consumers have no alternative options and must purchase from the monopolist, giving the seller significant control over pricing and supply.

The unique nature of the product or service means that it is differentiated by default, as there are no competing products that can serve the same purpose or fulfill the same needs as effectively. This lack of competition allows the monopolist to maintain pricing power and influence market conditions without the pressure to differentiate further against rivals, which is why it is correct to say that the competition is marked by differentiated products, although in the context of monopoly, differentiation arises from the absence of alternatives rather than competitive effort.

In contrast, the presence of a large number of sellers or just a few sellers would indicate a different market structure altogether, such as perfect competition or oligopoly. Additionally, the existence of close substitutes would suggest a competitive market rather than a monopolistic one. Therefore, the defining characteristic of a monopoly is its lack of close substitutes for the goods offered, reinforcing the unique position of the monopolist.