In mainstream theory, what is the definition of a monopoly?
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In mainstream theory, what is the definition of a monopoly?
Started by Murphy, Sep 07 2005 08:21 PM
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Posted 29 July 2008 - 10:59 AM
In the theory of pure markets, monopoly is one seller producing for the market at inefficient, price making levels, thus either restricting trade at allocative or technical inefficiencies.
Allocative inefficiency is not producing the most the firm is able and below what the consumers want. This create (makes) a monopoly price that is much higher than MC, misallocation of resources. Consumers pay more in prices and wasted resources.
Technical inefficiency is not using the best techniques to produce, using resources poorly, such as on keeping monopoly status: lobbying, price rebates, "rent-seeking."
Allocative inefficiency is not producing the most the firm is able and below what the consumers want. This create (makes) a monopoly price that is much higher than MC, misallocation of resources. Consumers pay more in prices and wasted resources.
Technical inefficiency is not using the best techniques to produce, using resources poorly, such as on keeping monopoly status: lobbying, price rebates, "rent-seeking."
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