What is a key consequence of a monopoly?

A monopoly is a market structure where a single seller dominates the market, leading to several significant consequences. One of the most notable outcomes of a monopoly is the ability to set higher prices for goods and services than would be possible in a competitive market.

Due to the lack of competition, the monopolist can dictate prices and may choose to charge what the market will bear, often resulting in prices above the equilibrium level. This scenario discourages consumer choice because, with no alternative suppliers, consumers are forced to purchase from the monopolist, even if the prices are steep.

Additionally, because the monopolist is not pressured by competitors to improve products or services, consumers often face a lack of choices and innovation. Thus, monopolies can lead to market inefficiencies and consumer dissatisfaction, confirming that higher prices and a lack of choices for consumers are a defining characteristic of a monopoly.