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Which price and quantity combination is undesirable for both the monopolist firm and society?

Which price and quantity combination is undesirable for both the monopolist firm and society?

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Answer #1

The minimum price that the monopolist can charge is equal to its marginal cost. This is also the price which is optimal for the society. The price and quantity combination determined by this policy is considered socially efficient but not a very welcoming situation for the monopolist in the long run. However for any price less than the marginal cost, the monopolist will shutdown operations and will leave the market in the long run. For the society it will also increase the inefficiency because price is less than the marginal cost.

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