Disadvantages of Monopoly Market
A monopoly is a market structure in which there are a large number of buyers and a single seller producing unique services and selling the price fixed by themselves. The firms are considered as price makers under this market as the firms have strong control over the price and also determine the price of goods and services themselves. The firms have high entry and exit barriers. The firm faces a downward-sloping but more inelastic demand curve than an oligopoly market.
Some of the disadvantages of monopoly are given below:
- Higher Price:
Monopolies have higher prices than a competitive market. Firms themselves set their prices and consumers have no other alternatives as there are no close substitutes for the product.
- The decline in consumer surplus:
Consumers pay higher prices and only high-income generated consumers can afford it. It leads to allocative inefficiency of the consumer income and declines in the consumer surplus.
- Unfair trade practices:
Under this market, monopolist firms only focus on their self-interest and profit maximization producing and distributing inferior products. There exist unfair trade practices.
- Low quality of goods:
Since there is no competition in such a market, a monopoly might provide a low or inferior quality of goods to save their cost of production in order to gain more profits.