Question

As detailed in the lecture, monopolies like perfectly competitive firms maximize their profits where marginal revenue (MR) is equal to marginal cost (MC). The difference however is that the monopolist produces less goods for society (economically inefficient) at higher prices to the consumer. Explain in detail why you feel that this is or is not an unfair waste of resources as well as an unfair pricing strategy for the consumer.

Answer 1

It can be mention that can you see from the perspective of a monopoly the maximum profit condition is when marginal revenue equals marginal cost and this allows it to produce less so that it can price high and gain profit out of it and like perfect competition where there are normal profits in the long run. However if you view the scenario in a particular when will understand that this is not unfair and this is because of the fact that, this allows the Monopoly to gain profits so that it can use the profits to re invest and expand the business and indulge in research and development activities so as to come up with new technology that can improve for trigger the productivity growth and this can make the country forward and ultimately due to more productivity the prices decrease only and that's why in not an unfair pricing strategy