Question

we already know what the standard graph for a monopoly looks like, theorectically speaking what does the government monopoly graph look like when we discuss something like the federal programs like social security or medicare?

Answer 1

Government monopolies like Social Security and Medicare operate to provide services rather than to maximize profits. Their economic graphs show demand and cost curves, but these do not behave like those of traditional for-profit monopolies. They may display characteristics of natural monopolies, prioritizing efficient service delivery over competition.

Step-by-step explanation:

Unlike a traditional monopoly where a single firm controls the market leading to profit maximization, government programs such as Social Security, Medicare, and Medicaid operate under different principles. These programs do not seek to maximize profits but to provide essential services and social welfare.

Although we can draw demand, marginal revenue, marginal cost, and average cost curves for such government monopolies, they do not follow the typical objective of profit maximization you'd expect in a traditional monopoly graph. The demand curve reflects the necessity of the service rather than traditional market demand, and the cost curves reflect the administration of these programs.

The total revenue might not exceed total costs due to the non-profit objective, and subsidies or taxes typically finance any shortfalls. The marginal cost and average cost might be high due to the lack of competition and efficiency pressures.

These programs often operate as natural monopolies for efficiency in service delivery and to meet social objectives, as in the case of a public transit system that serves as a natural monopoly because it's most efficient for one entity to maintain the infrastructure and provide the service.