What are some advantages or disadvantages of a market caused by a monopoly?

Traditionally, monopolies are considered bad for consumers. A firm who holds a monopoly faces less competition than a competitive market and when unregulated will sell their product at a higher price. Since the monopoly price is higher, consumers will make fewer purchases, resulting in a less efficient market. Economists call this deadweight loss and it can be calculated when given the demand and cost functions of a market. Monopolies can also engage in price discrimination where consumers pay different prices based on their willingness to pay or other factors. This can also reduce the efficiency in the market and eliminate the consumer benefit (also called consumer surplus).

Because the monopoly price is higher, this can have the advantage of attracting new firms to the market. If it is possible, other firms will attempt to produce a similar produce and earn profits like the firm holding the monopoly. If firms believe they can earn future profits, they may develop products that they can have a monopoly on. This provides an incentive to innovate and is the reason many governments provide and enforce patents and copyrights. Often these legal monopolies have an expiration date and the product "go generic" and any firm can produce the product, which will result in lower prices and more purchases.