As we saw in Chapter 12, the supply and demand model of a market is not universally valid. Instead, it’s a model of perfect competition, which is only one of several different types of market structure. We learned that a market will be perfectly competitive only if there are many producers, all of whom produce the same good. Monopoly is the most extreme departure from perfect competition.

In practice, true monopolies are hard to find in the modern American economy, partly because of legal obstacles. A contemporary entrepreneur who tried to consolidate all the firms in an industry the way that Rhodes did would soon find himself in court, accused of breaking antitrust laws, which are intended to prevent monopolies from emerging. Oligopoly, a market structure in which there is a small number of large producers, is much more common. In fact, most of the goods you buy, from autos to airline tickets, are supplied by oligopolies, which we will examine in detail in the next chapter.

Monopolies do, however, play an important role in some sectors of the economy, such as pharmaceuticals. Furthermore, our analysis of monopoly will provide a foundation for our later analysis of other departures from perfect competition, such as oligopoly and monopolistic competition.