We learned that in a competitive market equilibrium the Marginal Cost equals the Price, as Marginal Revenue is the same as Price for a perfectly competitive seller. Now, how does the Marginal Cost compare to Price at the monopolist's profit maximizing output and price combination? If Price is generally seen as the monetized Marginal Benefit to consumers of the product and Price exceeds Marginal Cost, then this is allocatively inefficient, as Marginal Benefit exceeds Marginal Cost.
We learned that in a competitive market equilibrium the Marginal Cost equals the Price, as Marginal Revenue is the same as Price for a perfectly competitive seller. Now, how does the Marginal Cost compare to Price at the monopolist's profit maximizing output and price combination? If Price is generally seen as the monetized Marginal Benefit to consumers of the product and Price exceeds Marginal Cost, then this is allocatively inefficient, as Marginal Benefit exceeds Marginal Cost.
Chapter8: Monopoly
Section: Chapter Questions
Problem 4SQ
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We learned that in a competitive
Now, how does the Marginal Cost compare to Price at the monopolist's profit maximizing output and price combination?
If Price is generally seen as the monetized Marginal Benefit to consumers of the product and Price exceeds Marginal Cost, then this is allocatively inefficient, as Marginal Benefit exceeds Marginal Cost.
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