The monopolist however faces much less compe?? on if any and therefore can a+ord to restrict output and charge a higher price. In this way The monopolist can earn abnormal pro%t in both the short and long run. In the long run perfectly compe?? ve %rms are both alloca? vely and produc? vely e-cient. The monopolist is Alloca? vely ine-cient since they do not produce all units up to the point where the social bene%t gained from the unit is equal to its social cost.
They restrict their output in order to keep prices high. They produce where MC=MR regardless of the cost to society in terms of dead weight loss or community surplus. They are also produc? vely ine-cient since they Do not operate on the lowest point of the average cost curve.
They operate at the pro%t maximizing output of MC=MR. Unlike a perfectly compe?? ve %rm the Monopolist faces a downward sloping demand or AR curve and a MR curve that is twice as steep. Regardless of monopoly power they must lower their prices to sell more. If they operate at the minimum point on the AC curve pro%ts may fall as prices will have to be reduced to sell this extra output.