In the case of a natural monopoly, the schedule for the firm is also the schedule for the entire market. This cost increase is inefficient. However, it is also inefficient to leave the monopolist to its own devices. Since perfectly competitive firms are price takers, the price of the product produced doesn't vary with the volume of sales. Thus, the marginal revenue is simply the price per unit of output.
Profit maximisation occurs when marginal revenue is set equal to marginal cost.
This is known as the welfare maximising point and satisfies the criterion for Pareto optimality. The demand curve for the monopolist's output reflects the marginal social benefit. The monopolist will attempt to reduce the quantity supplied to increase the price per unit of output. It produces at Q m , P m. Since the monopolist's marginal revenue will be bellow price, the marginal social cost of production will also be below price.