What is Wrong with Monopoly?
Economists have rather consistently argued that monopoly is undesirable. On this issue they are probably not in disagreement with the public’s rhetoric, though they sometimes see monopoly problems in different places than the public does. A monopoly is an industry in which there is one seller. Because it is the only seller, the monopolist faces a downward-sloping demand curve, the industry demand curve. The downward-sloping demand curve means that if the monopolist wants to sell more, it must lower its price. (We are assuming that price discrimination is not possible; that the firm can charge only one price.) Because the monopolist must lower price to sell more, the extra or marginal revenue it gets from selling another unit is less than the price it charges. Thus, its marginal revenue curve lies below its demand curve. In contrast, for a seller who is a price taker, demand is identical with marginal revenue. The table below illustrates the case of monopoly. Marginal cost is the value
