![]() A monopoly may also have the power to pay lower wages to its workers. For example, farmers have complained about the monopsony power of large supermarkets – which means they receive a very low price for products. ![]() Monopolies often have monopsony power in paying a lower price to suppliers.A big firm may become inefficient because it is harder to coordinate and communicate in a big firm. With no competition, a monopoly can make profit without much effort, therefore it can encourage x-inefficiency (organisational slack) Monopolies have fewer incentives to be efficient.This also leads to allocative inefficiency because the price is greater than marginal cost. Consumers pay higher prices and fewer consumers can afford to buy. For example, in the 1980s, Microsoft had a monopoly on PC software and charged a high price for Microsoft Office. Higher prices than in competitive markets – Monopolies face inelastic demand and so can increase prices – giving consumers no alternative.However, on the other hand, monopolies can benefit from economies of scale leading to lower average costs, which can, in theory, be passed on to consumers. Either a pure monopoly with 100% market share or a firm with monopoly power (more than 25%) A monopoly tends to set higher prices than a competitive market leading to lower consumer surplus. Monopolies are firms who dominate the market. What are the advantages and disadvantages of monopolies?
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