Why are monopolies inefficient?

A monopoly is occurs when there is a single firm is the only supplier of a good or service in a given economy. Thus, it is able to choose the price that it wants (price maker) and a given quantity that will maximise the firm's profits. This is opposed to a perfect competition where a given firm is a price taker and optimal output is determined by equating MC and MR. In a monopoly, however, price is higher and quantity is lower than perfect competition.
Thus, monopolies are inefficient because they do not respond adequately to the demands of the market and will create a deadweight loss for consumers and the economy as a whole.

HK
Answered by Harout K. Economics tutor

2197 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Describe how tariff could reduce imports.


Why might the Bank of England raise the bank rate if inflation rises above 2%?


The National Living Wage (NLW) government policy target is to increase the NLW to £9 per hour by 2020. Explain two possible impacts of this policy on the UK supermarket industry.


Name four changes that would cause an increase in an individual consumer's demand for a good or service.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning