According to The Economic Times a monopoly is defined as a market where the seller faces no competition as he is the sole seller of goods with no close substitute economictimes com So too is it a major potential cause of market failure Economics Online refer to a market failure as when a market fails to produce and allocate scarce resources in the most efficient way economicsonline co uk Essentially a successful market functions on the basis that there is productive efficiency not wasting the limited resources available and allocative efficiency ensuring that what is produced is what is most wanted and required and is distributed accordingly Antonioni Masaki Flynn 2011 A market failure is when these factors are absent or ignored A monopoly being primarily profit led seeks to raise prices and lower output and subsequently risk functioning dangerously close to the border separating a healthy market and market failure In this essay I will explore the exact reasons as the why a monopoly can cause a market failure the potential welfare losses because of monopolies and finally what the government can do to ensure a healthy market when it is monopoly led as well as the established boundaries governments set within which monopolies can function How can a monopoly result in a market failure The complete absence of competition relieves the firm of any urgency to produce quick quality or well priced goods or services
