Question

What problems did monopolies create?

Answer 1

Answer:

PROBLEMS CREATED BY MONOPOLIES:

1. monopoly can cause deadweight loss, or a lack of equilibrium between supply and demand.

2. disadvantages of monopolies include price-fixing, low-quality products, lack of incentive for innovation, and cost-push inflation.

3. it can cause inequality, and political abuse.

4. Monopoly tends to limit options available to consumers. Monopoly results in allocative inefficiency--in other words, the monopoly price is higher than the marginal cost of production. Profits do not encourage entry into the industry.

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