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

2198 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

Explain two causes of a shift of a supply curve to the right.


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


Explain why a firm in Perfect Competition earns supernormal profits in the short-run


What are some disadvantages of using GDP as a measure of living standards?


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