Impacts of Monopoly on Efficiency _ Boundless Economics.pdf...

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courses.lumenlearning.comImpacts of Monopoly on EfficiencySend to KindleA monopoly generates less surplus and is less efficient than a competitivemarket, and therefore results in deadweight loss.Evaluate the economic inefficiency created by monopoliesKey TakeawaysKey PointsThe monopoly pricing creates a deadweight loss because the firm forgoestransactions with the consumers.Monopolies can become inefficient and less innovative over time becausethey do not have to compete with other producers in a marketplace.In the case of monopolies, abuse of power can lead to market failure. Marketfailure occurs when the price mechanism fails to take into account all of thecosts and/or benefits of providing and consuming a good.A monopoly is an imperfect market that restricts output in an attempt tomaximize profit. Without the presence of market competitors it can bechallenging for a monopoly to self-regulate and remain competitive overtime.Key Termsmonopoly: A market where one company is the sole supplier.market failure: A concept within economic theory describing when theallocation of goods and services by a free market is not efficient.
inefficient: Incapable of, or indisposed to, effective action; habitually slack orremiss; effecting little or nothing; as, inefficient workers; an inefficientadministrator.MonopolyA monopoly exists when a specific enterprise is the only supplier of a particularcommodity. Monopolies have little to no competition when producing a good orservice. A monopoly is a business entity that has significant market power (thepower to charge high prices).Inefficiency in a MonopolyIn a monopoly, the firm will set a specific price for a good that is available to allconsumers. The quantity of the good will be less and the price will be higher (this

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Term
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Professor
Monsod

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