A monopoly can really change how prices are set and how customers can choose what to buy. Let’s break it down:

1. Control Over Prices

• In a monopoly, one company has a lot of power over the entire market. This means they can set prices higher than when there are many companies competing for customers.
• The company tries to make the most profit by finding the point where the cost to make one more item (marginal cost, or MC) matches the money they make from selling one more item (marginal revenue, or MR). This often leads to higher prices and fewer items being sold.
• For example, if the cost to make one item is $10 and they earn$15 from selling it, the monopoly might sell it for $20, making more profit but selling less overall.

2. Less Choice for Consumers

• When there are only a few choices or even just one company, customers have fewer options. This can mean less new and exciting products since the monopoly doesn’t feel the need to make their goods better.
• For instance, think of a utility company that is the only one that provides electricity in a town. If people want lower prices or better service, they can’t switch to another company because there aren’t any.

3. Wasted Consumer Benefits

• Monopolies can cause something known as deadweight loss. This means they make less of a product and charge more than would happen in a competitive market.
• There’s a gap in the market where the demand (what people want) is greater than the quantity produced. This gap shows how much potential benefit is wasted when fewer items are made and sold.

In summary, monopolies can really mess with how prices are set and limit what customers can buy. This leads to higher prices, fewer choices, and a market that doesn’t work as well as it could. It’s a big difference from the advantages you usually find when there are many companies competing!