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

2201 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Why might expansionary demand side policies not always be effective in promoting economic growth?


Explain why the demand for food is relatively price inelastic


Bill's Diner is an American burger restaurant. There is an increase in import costs of products needed from America, and change in perceptions of fast food such as burgers, due to an increase in health warnings. Discuss the effects on the market. (6)


Explain the impact on a firm due to an increase in the minimum wage.


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