1. If monopoly power existed in an industry, would production be above or below the socially efficient level (assuming no externalities)? Which would
1. If monopoly power existed in an industry, would production be above or below the socially efficient level (assuming no externalities)? Which would be greater, MSB or P?
\r\n2. Assuming perfect competition and no externalities, social efficiency will also be achieved in factor markets. Demonstrate that this will be where:
\r\nMSBf = MRPf = Pf = MDUf = MSCf
\r\n(where MRP is the marginal product of a factor, MDU is the marginal disutility of supplying it and f is any factor – see section 10.1).