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

2030 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

What is an easy way to remember the effects of the exchange rate on imports and exports?


How should put in my essays for 25 mark questions?


Explain how rising interest rates affect consumption


What is an inferior good?


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:

© 2025 by IXL Learning