Explain which types of market inefficiencies derive from monopolies. use examples from the textbook to support your claims.

Question: Explain which types of market inefficiencies derive from monopolies. use examples from the textbook to support your claims.

Monopolies can lead to market inefficiencies such as higher prices and reduced output levels. With no competition, monopolies have the power to set prices higher than what would be seen in a competitive market, leading to a transfer of surplus from consumers to the monopolist. This can be seen in the case of De Beers, a diamond company that controlled the vast majority of diamond mines, allowing them to control the supply and raise prices. Monopolies can also lead to a reduction in output levels as the monopolist restricts production to maintain high prices, as seen in the case of Microsoft, where they were found to have used their dominant market position to stifle competition in the software industry.

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