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

Chapter 10: Monopoly and Competition 131
Technical Matters
1. In his critique of the fear of monopoly, Rothbard says
that consumers “benefit from the resulting voluntary
exchanges” (p. 634), and that “if the resulting
exchanges really hurt them, consumers would boycott
the ‘monopolistic’ firm” (p. 635). He also points
out that the motives of alleged monopolists are no
different from the motives of any other producer.
Although true, these particular responses would not
satisfy a mainstream economist. The claim is not that
consumers would be better off with no producer at all
(rather than a monopolist), but rather that monopoly
is bad compared to the case of a perfectly competitive
market. Moreover, the standard mainstream economist
does not attribute sinister motives to the
monopolist; he concedes that the perfectly competitive
firm seeks to maximize profits just as the monopolist
does. The alleged difference, however, is that
the market structure in the case of competition leads
the selfish producers to set output at the “optimal”
level, i.e., where P=MC, whereas the monopolist
(because of a falling demand curve) sets output where
P>MC. (Of course Rothbard later deals with these
arguments.)
2. Almost all of mainstream industrial organization theory
relies on the assumption of a single price for all
units. But as Rothbard points out (p. 641), the alleged
“deadweight loss” of producing where P>MC could
always be avoided if the firms with market power
were able to cut side deals with consumers and sell
additional units at lower prices. Organizations such
as Sam’s Club, which charges a flat membership fee