Monopoly Markets (Cambridge (CIE) IGCSE Economics)

Large profits generate money for continued investment in technology and product innovation

Market power enables the firm to increase its global competitiveness

Economies of scale can increase thereby lowering the average cost

Price discrimination: the firm can charge consumers different prices based on the different price elasticity of demand for the product e.g. peak (inelastic) and off-peak (elastic) travel on trains

Due to a lack of competition, there is a reduced incentive to be efficient

Cross subsidisation can create inefficiencies

Monopolies lead to a misallocation of resources as they limit supply in order to increase price

Due to a lack of competition, innovation sometimes lacks effectiveness 

Large profits often result in higher wages

Having only one supplier in the industry limits the opportunity to change employers

Product innovation due to the firm's large profits may result in a better-quality product

Cross subsidisation can lower prices on some products that the firm provides

Prices may fall If firms pass on their cost savings to consumers (due to economies of scale) in the form of lower product prices

A lack of competition is likely to result in higher prices as no substitute goods are available

A lack of competition may result in no product innovation and worse product quality over time

May experience worse customer service as the incentive to improve it is limited

Cross subsidisation is likely to increase prices on some products offered by the firm

Increased sales volume for some suppliers as they are able to supply products that are distributed nationally or internationally

There is less competition for their products and a monopoly often has the power to dictate what price they will pay to suppliers