In a monopoly market structure, how does the price-setting behavior of the firm affect market efficiency compared to a perfectly competitive market where firms are price takers?

In a monopoly market, a single firm controls the entire supply of a product, allowing it to set prices higher than in a perfectly competitive market. This firm aims to maximize its profits by reducing output to increase prices, which can lead to fewer goods being available for consumers. In contrast, in a perfectly competitive market, many firms sell similar products, and they cannot set prices; instead, they accept the market price determined by supply and demand. As a result, resources are allocated more efficiently in a competitive market because firms produce at a level where price equals the cost of production, leading to more choices and lower prices for consumers. For example, if a monopolist sells ice cream at $5 per cone, while in a competitive market, many sellers might drive the price down to $3 per cone, making it more accessible to everyone.