From a social standpoint, what is the problem with monopoly?
Q12.2 ANSWER
The problem with monopoly from a social standpoint is that it leads to an inefficient allocation of productive resources and an inequitable allocation of income. From an efficiency perspective, monopolies produce too little output at too high a price. As a result, the demands of consumers are only partially met. Because P > MC, the marginal value of output (P) exceeds marginal production costs, and social welfare would rise with an increase in production. From an equity perspective, the excess profits that can arise due to unregulated monopoly are often criticized as unwarranted and thus unfair.
From a social standpoint, what is the problem with monopoly?Q12.2 ANSWERThe problem with monopoly from a social standpoint is that it leads to an inefficient allocation of productive resources and an inequitable allocation of income. From an efficiency perspective, monopolies produce too little output at too high a price. As a result, the demands of consumers are only partially met. Because P > MC, the marginal value of output (P) exceeds marginal production costs, and social welfare would rise with an increase in production. From an equity perspective, the excess profits that can arise due to unregulated monopoly are often criticized as unwarranted and thus unfair.
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