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Monopoly exists when a single firm is a sole provider of a service or commodity. It has
an undisputed power to decide the amount of good to be supplied and the price to be charged.
Therefore the output that is produced is not socially optimal and it creates a deadweight loss to
the society by not utilizing the resources efficiently and more importantly not distributing them
properly. A monopolist plans its strategy so as to make it difficult for its competitors to enter the
market. It enjoys full economic power over that market. There are several examples of firms
exercising their monopoly power to earn super normal profits. One such case is that of Microsoft
Company which exercised monopoly power in the area of operating systems throughout the 80s.
Since Microsoft was one of the first players to enter into the market of operating systems,
it gained advantages in terms of experience, invested capital and people. The later entrants had to
invest much more in order to pose as competitors to Microsoft which made the entry difficult for
small investors. Microsoft after creating Applesoft Basic for Apple Computer entered the OS
market with MS DOS 1.0. Within a few years it had over 90% of the OS market. In order to
continue its domination over the market, Microsoft has entered into other business ventures
which were related to its field so that it can exercise control not only over the goods sold in the
market but also the services being provided. It acquired Skype Technologies for about $8.5
billion.

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