When does a firm have too much monopoly power?

The monopolistic power is the result of the market characteristics that a monopoly has. First of all, the monopolist is the only seller in the market of a product or service. Additionally, there are no close substitutes for the product or service. When there are no other sellers and there are not substitutes the demand becomes inelastic. That is to say, any price change will not have a significant response to the consumers since they do not have more purchasing options. This market power is also derived from the high barriers to entry. The initial investment, intellectual property rights, costs advantages, unique technology among others, are entry barriers that limit the entrance of new competitors. When there are no new competitors the market power belongs only to the monopolist. This market power allows monopolists to limit the output and increase prices. However, there are situations in which the monopolistic power is that high that can damage the well being of the consumers. In the case of pure monopolies, the firm can limit the supply of a good that can be highly necessary for consumers such as medicines, or food that is essential for daily consumption. Therefore, when the monopolist threatens the welfare of society, governments need to intervene and create policies to help the population.