Study Guide to Man, Economy, and State with Power and Market

126 Study Guide to Man, Economy, and State with Power and Market
3. The Illusion of Monopoly Price
A. Definitions of Monopoly
A monopoly may be defined as (1) a single seller of a
good or service, (2) the recipient of a government privilege,
or (3) a business unit that can achieve monopoly
prices. The first definition is vacuous; everyone is a
monopolist in this sense. The second definition is legitimate,
and focuses on government intervention that hampers
welfare. The third definition is empty once we realize
there is no such thing as “monopoly price.”
B. The Neoclassical Theory of Monopoly
Price
The neoclassical theory of monopoly assumes that
there is some identifiable “competitive” price and level of
output with which to contrast the “monopolistic” price
and output.
C. Consequences of Monopoly-Price Theory
Even if neoclassical monopoly theory were valid, the
standard, sinister conclusions would not necessarily follow.
Such monopolists would still be subject to the consumers’
voluntary spending decisions, and there would
be no lasting monopoly “profits,” but rather monopoly
gains imputed to certain factors of production.
D. The Illusion of Monopoly Price on the
Unhampered Market
Simply put, there is no such thing as a “monopoly
price” to which we can contrast a “competitive price”;
there is no way we can even in principle define these