Useful! Why Is There A Social Cost Of Monopoly

Monopoly creates a social cost called a deadweight loss because some consumers who would be willing to pay for the product up to its marginal cost MC are not served. For optimum allocation of resources OQ amount of the product at which marginal cost equals price should have been produced and resources allocated accordingly.

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From an economic perspective and from a partial equilibrium point of view looking just at the market where the monopolist operates there is a social cost because the monopolist could produce more and the marginal benefit to people would outweigh the marginal cost to the monopolist.

Why is there a social cost of monopoly. It is not a new argument being one that was very cogently put by Ricardos. The social cost of the monopoly as simply the monopoly profits plus the deadweight loss.

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