Traditional thinking is that a monopoly means that there is one single supplier of any particular category of goods or services.
It's a fair enough starting point, but then people tie themselves in knots trying to decide how widely or narrowly this should be defined. So there might be only one ferry company between Port A and Port B, but if there is also a road bridge and an airport connection between A and B, does the ferry company really have a monopoly etc. Further, having a monopoly is no guarantee that your business will make super-profits or even profits. Even if you are the only ferry between Port A and uninhabited island B, if there is insufficient demand, the service might well be loss making.
But this is all pretty irrelevant, all that matters to the man in the street is this simple observation:
... in a perfectly competitive market there is a well defined supply function with a one to one relationship between price and quantity supplied. In a monopolistic market no such supply relationship exists. A monopolist cannot trace a short term supply curve because for a given price there is not a unique quantity supplied. As
Pindyck and Rubenfeld note, a change in demand "can lead to changes in prices with no change in output, changes in output with no change in price or both".
That makes indentifying a "monopoly" much easier, you can put "land" at the top of the list. It does not matter how much you sub-divide land or how many million owners there are; a change in demand leads to a change in price with no change in quantity supplied.
Copyrights and patents are another kind of government-protected monopoly. You write one book or invent one thing, the amount of money you can earn from it depends entirely on demand and bears little relation to the effort or skill you put into it.
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As a separate issue, BenJamin' and I have discussed this to death, whether and what we 'should do' about a monopoly depends on how it arose. Depending on the circumstances, the correct response is either:
1. Do nothing. Who cares if super-rich people keep bidding up the price of Picassos? Copyright periods are probably too generous but patents expire after twenty or so years, which seems fair enough.
2. Reduce barriers to entry, especially if they arise from government regulations (for example taxi driver licences).
3. Cap prices (for example with utilities).
4. Tax away the super-profits (such as a Land Value Tax or imposing a higher tax on copyright royalties).
5. In some situations, it might be better just to nationalise something (for example refuse collection).
Debate Magazine
