Monopoly Output Levels : Profit Maximization :: Socially Optimal Output : ?

In a monopoly, the firm aims to maximize its profits by producing a specific output level where its marginal cost equals its marginal revenue. This means the monopoly will set a price higher than the cost of producing the good, leading to fewer products being sold compared to a competitive market. On the other hand, the socially optimal output level occurs where the price of the good equals the marginal cost of production. This is important because it ensures that the total benefit to society is maximized, making goods available at a price that reflects their true cost. For example, if a company produces a medicine that costs $10 to make, the socially optimal price would also be $10, allowing everyone who needs it to access it, while a monopoly might charge $20, limiting access and reducing overall welfare.