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Assignment on Microeconomics (PDF)

Added on - 19 Nov 2021

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Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Course ID
MICROECONOMICS1
Table of Contents
Empirical study of social inefficiency of monopoly........................................................................2
References........................................................................................................................................8
MICROECONOMICS2
Empirical study of social inefficiency of monopoly
The standard theory of microeconomics and that of industrial economics suggest that
existence of monopoly power in the market leads to a net loss in welfare resulted from
misallocation of resources (Jahantighet al.2015). This is called deadweight loss from monopoly
power. In other words, the monopoly market inflicts a direct cost to welfare leading to social
inefficiency.
Figure 1: Social inefficiency from monopoly
In the above figure resulted inefficiency from monopoly power is shown by the shaded
triangle. Because of maximum market power in the market, monopolist sells a lower than
socially efficient output at a higher price. Empirical studies had been conducted to compute the
social cost monopoly. The past paper mostly attempted to compute social cost of monopoly by
computing area of the triangle indicating welfare loss. With passes of time new papers had been
developed using new approach to measure inefficiency.
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