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Why are monopolies inefficient?

Posted on April 17, 2014 at 12:40 AM

Monopolies are inefficient compared to perfectly competitive markets because it charges a higher price and produces less output. The term for inefficiency in economics is deadweight loss. Since the monopolist charges a price greater than its marginal cost, there is no allocative efficiency. Society loses the area between the perfectly competitive output and the monopolist output.


This No Bull Review video shows you how to find the area of deadweight loss resulting from a monopolistic market structure.

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AP Microeconomics Unit 2 Product Markets

Categories: AP Microeconomics, Micro Unit 2 Product Markets

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