Question

Why are monopolies undesirable for an economy?

Answer 1

Monopolies are created basically for having advantages in raw materials, technology, and requirement of huge capital etc which basically gives market power to the monopolies through which they increase the price. The increased prices create an imperfect market which makes the monopolies to enjoy more profit for lower quantities. Hence imperfect market are not ideal for markets as it would lead to lower consumption because of high prices, leading to lower economic activity.