Existence of Monopoly Against the Public Interest - Essay Example

A monopoly, as the argument goes, raises the price, reduces output while exploiting consumers and acting against the public interest.  Basically, a monopoly is a price setter. It looks for a price on the market demand curve that will maximize its profits- both in the short run and the long run. Unlike the perfect competition, the monopolist's marginal revenue from each unit is not constant (Samuelson, 2010).

The table below shows that the demand increases as the price decreases-the basic downward sloping demand curve. However, the marginal revenue decreases as each unit of output are increases. Therefore, the monopolist raises the price and restricts output to maximize its returns (Samuelson, 2010).

Output

Price

Total revenue

Marginal revenue

0

$14

$0

—

1

12

12

$12

2

10

20

8

3

8

24

4

4

6

24

0

5

4

20

−4

Similarly, the monopolist will produce the number of units when its marginal cost is equal to the marginal revenue. This signifies that there will always be more demand than there will be supply to maximize profits. (Samuelson, 2010)