Socially+Optimal+Price

The socially optimal curve is put in place when the goverment decides that is unfare for a monopolistic firm to charge the price that they do. So the goverment places a price ceiling. It just so happens to be an allocatively efficient place to price the object at. Also this makes it very difficult for the monopoly to make a profit. There have even been known conspiracies where firms have lied about the costs inorder for them to charge a higher price on the object in order to make a profit. But otherwise it is impossible for them to make an economic profit because it is the point where the marginal cost line crosses the demand curve. It is the point where the Price intersects the MC curve. There are even government aggencies in existance with the soul purpose of making sure that big companies keep all of their calculations accurate.





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Is the socially optimal price location allocatively and productively efficient?

it is allocatively but not productively efficient.