The market effects of a legal monopoly are similar, regardless of whether it is government-operated or privately owned. Most obviously, buyers who would otherwise have purchased the good or service from alternative sellers are denied the opportunity to maximize their value scales. Since free-market purchasing decisions would normally be based either on perceived quality or on price, the monopoly policy typically requires users to accept either a higher-priced good or a good of lower quality.

If the monopoly's pricing practices are dictated by political requirements, however, some customers may be subsidized at the expense of others. For example, first-class postage in the United States is required to be uniform; as a consequence, urban users generally subsidize rural users. Similarly, the rate schedules of electric-power companies must be approved by state regulatory commissions, which are strongly influenced by political considerations. Typically, industrial and commercial electric customers are forced to subsidize residential customers, who are billed for less than the full cost (including interest and risk premium) of the service they receive. Residential customers pay an indirect penalty for this subsidy, since the increased electric costs of businesses are reflected in decreased production levels of all the goods and services they purchase as consumers; this effect, however, is seldom recognized by voters and is therefore politically insignificant. Even if the legal monopoly's price structure subsidizes certain customers, the aggregate cost for all customers is typically increased by the suppression of competition. Often, as a consequence, prices may be higher even for subsidized customers. (General effects of subsidies will be analyzed later in this section.)