Why is monopoly inefficient ?
Without competition, a company does not have to strive to maximize the resources it uses in production. Example: You have four timber companies. Each company is basically the same until Company D comes up with a new way to cut timber. This new way gets them more units of lumber per tree. So now they can sell more lumber at a lower price, undercutting the competition. Companies A, B, and C will have to find similarly efficient ways to maximize production or be driven out of the business. This is also good because in the long run you are also using natural resources more efficiently. However, in a monopoly, there is no such impetus to be efficient with resources. A single company may rely on the same method of doing something for years, without thought of improving efficiency. You see this a lot in government entities. For example, I used to work at a school district. You know that basically the local school district is the only show in town (except for maybe a few parochial schools). Pe
