Question

Economists know that a monopoly--a market in which one firm sells a good or service that has no close substitutes and in which a barrier blocks the entry of new firms--does not use resources efficiently. For example, the tech firm Microsoft’s prices are too high in the sense that they exceed marginal cost and result in fewer copies sold of the Windows operating system and Office applications than the efficient quantities.

·         Explain what makes a monopoly inefficient.

·         Explain whether a monopoly is fair based on the two views, i.e., fair rules and a fair result.

Your evaluation should be based on your experience dealing with monopoly market products such as Microsoft Office, your everyday life, and your research conducted on this topic.

Economists know that a monopoly--a market in which one firm sells a good or service that has no close substitutes and in which a barrier blocks the entry of new firms--does not use resources efficiently. For example, the tech firm Microsoft’s prices are too high in the sense that they exceed marginal cost and result in fewer copies sold of the Windows operating system and Office applications than the efficient quantities.

·         Explain what makes a monopoly inefficient.

·         Explain whether a monopoly is fair based on the two views, i.e., fair rules and a fair result.

Your evaluation should be based on your experience dealing with monopoly market products such as Microsoft Office, your everyday life, and your research conducted on this topic.

Answer 1

Monopoly market is a situation where the existence of the single firm and there is no close substitute for the product the monopoly market is the insufficient market because of the following reason.

• The price of the goods is greater than MC of the product
• The output produced is less than optimum size supply is restricted by the firm

In the case of giant Microsoft Company, it considers as the monopoly because the copyright of the software and trademarks, This makes Microsoft corporation to enhances their market share and increasing their monopoly power.