Answer to Question #108856 in Microeconomics for Yoyo

Question

Monopoly equilibrium is always inferior to perfect competition equilibrium from society ‘s point.
Comment on this statement.

Answer 1

An equilibrium point is a point where the market clears. I n other words it is the point where the quantity demanded is equal to the quantity supplied in the market. A monopoly is a market structure that is mainly characterized by the existence of one seller and many buyers while the perfect competitive market is a market that is characterized by existence numerous buyers and sellers.

Based on the welfare economics perfect competition equilibrium is superior than the monopoly equilibrium since at at perfect competition equilibrium consumers pay less for commodity and acquire more goods. On the other hand, at monopoly equilibrium consumers pays more and receives fewer goods. Therefore, consumers dig more in their pockets to acquire a good or a service in the monopoly market. Monopoly are able to choose the level of quantity to produce and the also the quality of the product and therefore, monopoly may produce a less quality product that doesn't satisfy the need of consumers or produce in less quantity thereby.