Evaluation of Monopoly

In most cases, it has been observed that the monopolist charges a high price by supplying less than desired in the market. The socially desirable output is when P = MC The price (P) depicts the money that the society is willing to pay and marginal cost (MC) shows the cost incurred in the production of the last unit of the good. Downward sloping demand curve results in the price being higher than the MC (P> MC) Thus, it is often said that the monopoly price is higher than the competitive price. It is further stated that monopoly restricts consumer choice. The consumer has to purchase what is offered for sale in such a market situation, as there is a single seller of the good.

Despite these drawbacks, monopoly markets are regarded as a significant part of the economy as the monopolist is considered to invest in R&D due to supernormal profits earned by him. They also do not indulge in wasteful expenditure in the form of advertising, etc., that is essential in monopolistic competition and oligopoly. 

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