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Why is it true that an economy in which one industry is a monopoly and one...

Why is it true that an economy in which one industry is a monopoly and one is competitive is economically inefficient?

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Answer #1

Monopoly industry have become more ineffecient than competitive one due to following reasons-

  • Monopoly industries do not have to compete with other industries or producers due to which they have become less efficient and less innovative
  • In competitive market there are manuy substitutes hence the long term substitutes can easily take over when monopoly industries become inefficient
  • They set a single specific price for the product due to which lower class of people donot able to buy the product which becomes one of the reasons for inefficiency
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