The reason for producing a socially undesirable output by
Explanation of Solution
Monopoly is an imperfect market structure where there is only a single seller and more buyers. The monopolist controls the market prices and there are barriers in entry into the market and there are no substitute goods available in the market. The firm produces less output and increases the price without affecting all demands of the product. This may affect people badly. This market power leads the firm to earn long-run profit. The monopolist charges higher price than its marginal cost, which results in producing less than the optimal level of output.
Monopoly: Monopoly is an imperfect market structure where there is only a single seller and more buyers. The monopolist controls the market prices and there are barriers in entry into the market and there are no substitute goods available in the market.
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