Question

In three to four sentences, explain why prices decrease when the market moves from a monopoly to perfect competition?

Answer 1

When a company has a monopoly on a product, there is no other competition so that producer can price the product however high they want.  When there is competition, the product must be priced appropriately or the consumer will go to another option. Additionally, monopolies can result is a lesser quality product. 

Answer 2

Answer:

Prices will decrease when a market moves from a monopoly to a perfect competition mostly due to the fact that different providers of goods will try to outbid the other providers and will for that reason try to provide lower prices; to attract more customers.