CHAPTER 15MONOPOLY329would choose. As we have seen, the monopolist chooses to produce and sell thequantity of output at which the marginal-revenue and marginal-cost curves in-tersect; the social planner would choose the quantity at which the demand andmarginal-cost curves intersect. Figure 15-8 shows the comparison. The monopolistproduces less than the socially efficient quantity of output.We can also view the inefficiency of monopoly in terms of the monopolist’sprice. Because the market demand curve describes a negative relationship betweenthe price and quantity of the good, a quantity that is inefficiently low is equivalentto a price that is inefficiently high. When a monopolist charges a price above mar-ginal cost, some potential consumers value the good at more than its marginal costbut less than the monopolist’s price. These consumers do not end up buying thegood. Because the value these consumers place on the good is greater than the costof providing it to them, this result is inefficient. Thus, monopoly pricing prevents
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