Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

10. No selling cost: The monopolist does not incur selling cost of 
any kind i.e., the expenditure on advertising, transport etc. This is 
because he sells a unique product, which has no close 
substitutes. If the monopolist does incur selling cost, it is to make 
the public aware of the product and not to increase sales. 
 
4.2 TYPES OF MONOPOLY 
 
1. Natural Monopoly:
Such monopoly arises due to endowment of resources by 
nature and natural advantages such as climatic conditions, good 
location, and availability of certain minerals or raw material at only 
certain places. Man cannot increase the supply of these 
resources. When a single firm owns the source of such resources 
or whichever firm is the first to claim the use of that resource it is 
said to have natural monopoly. The producers of such a product 
enjoy natural monopoly as they have complete control of its 

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supply. The extent of exploitation by the seller depends upon the 
importance of the product to the consumer e.g., at international 
level Gulf countries have monopoly in oil, South Africa in 
diamonds, Malaysia in tin and natural rubber and within the 
country TISCO at Jamshedpur, wheat in Punjab, rice in Tamil 
Nadu and jute in Bangladesh and India. 
 
2. Legal Monopoly:
It is also known as statutory monopoly. Such monopolies 
emerge on account of deliberate legislation by the State. Legal 
provisions like patents, copyrights, trademarks etc., are used by a 
producer to legally protect him for a stipulated period, whenever 
he invents or discovers a new product. The law forbids the 
potential competitors to imitate the design and form of product 
registered under the given brand names, patents or trademarks. 
Thus, the competitors are restrained by law e.g. medicines, 
essential services such as water supply, electricity, transport, 
postal services etc. Legal monopoly in the form of statutory 
rationing is resorted to during times of scarcity such as war, 
foreign aggression, famine etc.