What are the economic consequences of monopoly?
Monopoly Leads to Higher Prices Higher prices are the most widely recognized consequence of monopoly. This recognition led the famous 18th century English economist Adam Smith to declare: “The price of monopoly is upon every occasion the highest which can be got.” Monopolists Restrict Output Monopolists get away with charging so much more for their product because they restrict output. In other words, by deliberately undersupplying the market with their product monopolists create artificial shortages forcing consumers to bid up the price for the limited quantities available. If the manufacturers of OEM parts are successful at eliminating competition from the crash parts business, not only will prices rise but many cars will take longer to be repaired, go entirely unrepaired or, as discussed previously, be unnecessarily declared constructive total losses. Monopoly Results in Lower Quality Products In competitive markets firms compete not only the basis or price, but also on the basis of
