this is work for (siddharth only)

A. Compare the competitive price charged and quantity produced under perfect competition and monopoly. Other than identifying the presence of only one producer under monopoly, why do we tend to see this differential?

  Under perfect competition, firms have an elastic demand curve and cannot control price. Since firms cannot control the price, they regulate quantity and produce only at the quantity that will maximize profits (MC=MR). If at this particular quantity the price is greater than the average total costs, the firms will have excess profit. The monopolist has a downward sloping demand curve, which is also its average revenue curve (graph 15-5). When average revenue is declining, the marginal revenue is lower than the average revenue. Even though there is only one firm under a monopoly, they follow the same rule as everyone else which is to produce until MR=MC. The difference between perfect competition and monopoly is not only that monopoly consists of one firm; it is seen in how their profits are made. There are no barriers to entry under perfect competition, whereas the barriers under a monopoly prevent it from having competition.

 B. Does a monopolist achieve efficiency in its production (that is, does it produce where MR = MC)? Will society face a welfare loss in a monopolistic market?

A monopolist will not achieve efficiency in its production; instead it creates a deadweight loss by restricting its supply. In order to a firm to achieve efficiency, it needs to continue produce when the demand curve is above the marginal cost curve and reduce production when the demand curve is below the marginal cost curve.  As seen in the graph (triangle D and B), monopolies create a welfare loss to society by reducing output and charging a price that is higher than marginal cost.  The welfare loss is also seen because the marginal cost of increasing output is lower than the marginal benefit of increasing output.

C. Applying University Core Values of responsible stewardship to this question, would you consider that there is never good cause to allow monopolies to operate? Please take into consideration your answer to Part (b).

When applying university Core Values of responsible stewardship to the question on if monopolies should be able to operate I believe the answer is no. university Values of responsible stewardship state “Our Creator blesses us with an abundance of resources. We must be resourceful. We must optimize and apply all of the resources of our community”. In my opinion a monopoly is being selfish when it comes to the abundance of resources our Creator has blessed us with. There are billions of people in this world, which is enough for everyone under perfect completion to be efficient and profit. An example of a local monopoly would be Virginia Dominion Power. There are millions of people in this state, most of all who need their services of power. Even if power companies were under perfect competition, there would always be plenty of people to be in demand of their services, allowing everyone to have their fair chance at making profit.