Participate in a discussion with your classmates regarding the monopoly markets that you encounter in your everyday life. Review the “EYE on MICROSOFT” caption titled “Are Microsoft’s Prices Too High?” on page 423 in the textbook. A monopoly is a market in which one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms. We learned in previous lesson plans that resources are used efficiently when marginal benefit equals marginal cost. As noted in Figure 16.6(b), page 410 in the textbook, a monopoly is inefficient.
In addition, as noted in “Are Microsoft’s Prices Too High?", Microsoft’s prices are too high in the sense that they exceed marginal cost and result in fewer copies sold of the Windows operating system and Office application than the efficient quantities. Compare the graph in this section with the graph in Figure 16.6(b).
Post your discussion explaining and evaluating why a monopoly is inefficient and whether a monopoly is fair based on the two (2) views, i.e., fair rules and a fair result, as described in the textbook.
Your evaluation should be based on your experience dealing with monopoly markets, such as, Microsoft Office, in your everyday life, and your research conducted on this topic. If you discuss Microsoft don't just focus on marginal costs. Remember, they must cover their fixed costs, too.