- 7 Marks
Question
A monopoly is a market structure in which a single seller or producer assumes a dominant position in an industry or a sector. In most jurisdictions, legislations are in place to restrict monopolies and ensure that one business cannot control the market.
Required:
i) Explain THREE reasons monopoly control over a market might be undesirable
Answer
- Higher Prices: When a monopoly firm controls a market, the prices charged are likely to be higher than they would be in a competitive market.
- Reduced Demand: Because prices are higher than in a competitive market, the demand to buy the product is likely to be lower. A monopoly has the effect of raising prices and reducing output.
- Limited Choice: When there is a monopoly, there will be less variety and choice for customers. This lack of competition leads to inefficiency and lack of innovation.
- Tags: Market Control, Monopoly, Uncompetitive Markets
- Level: Level 1
- Topic: Competitive forces and markets
- Series: Nov 2024
- Uploader: Salamat Hamid