True, but remember, the reason we fear monopoly is because we fear that it will lead to exorbitantly high prices. At some point, the Venetians, if they choose to price-gouge, will make it worthwhile for the Pope to enter into this trade as a competitor, because he knows he can charge much lower prices than the Venetians to still recoup his initial investment.
Monopolies don't price gouge per se. The optimal price for a monopolist is higher than in a competitive market, but it's not always astronomical. The reason is that fewer people will buy the product as the price goes up, monopoly or no, and the monopolist wants to set his price to maximize profit.
But in this example, the Pope's problem is that he can look at the Venetians' prices all he wants and think about how he can charge lower prices profitably. But he knows that if he tries, Venice will just cut prices to force him out. So he never does anything, and the Venetians keep on charging their monopolist prices.
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