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

1982 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Explain the effect of a subsidy on equilibrium price and quantity in a demand and supply model.


Using Figure 5, assess whether the decision to install the machine (used in production in an independent fast food shop) will be beneficial for the business and the workers.


Draw and label a diagram to show the effects on the equilibrium market position to show the effects of a hot sunny day on the market for ice creams.


What is opportunity cost?


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