Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 15 of 32 - Monopoly
Section 20 of 32
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Whenever a consumer pays an extra dollar to a producer because of a high price
· the consumer is worse off by a dollar
· the producer is better off by a dollar
More producer profits result in a larger economy and more and better paying jobs.
Welfare in all markets is the sum of the welfare of both consumers and producers = consumer surplus (paying a lower price than the value) + producer surplus (profits).
A monopoly firm's profit itself is not a problem for society.
The problem is the deadweight loss shaded area shown in Figure 8.
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There is often another cost incurred by monopolies: lobbying cost.
Monopolies want to maintain their monopoly position.
So, they typically use a portion of their monopoly profits to lobby lawmakers to help them keep their monopoly.
The result is monopolies create two social costs: deadweight loss and lobbying costs.
For example, U.S. producers of a product spend time and money lobbying the government to place tariffs on imports of the same product from foreign firms.
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lobbying the government
seifu e robī katsudō
政府へロビー活動
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