re: Economic question: If a low supply means a higher price, why mass produce?

Man, I guess it shouldn't surprise me that this type of high-powered thinking goes on around here.

Pretty much every response in this thread misses the mark. It's not a question about feasibility, or taxes, or cost of acquiring the land, or global competition, or any of that stuff. It doesn't matter how the monopoly position was achieved, the question is simply "why mass produce?"

The answer is because the goal isn't to maximize profit per unit sold, instead the goal is to maximize profit per unit time. Even in a scenario where one entity controls the entire supply of a good, as long as there is widespread desire for the good, the optimal strategy will always be mass production and lower prices. Profiting from the masses requires mass production.

quote:

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Selling ten Bushels at $30/bushel is batter than selling twenty at $5/bushel.

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While correct, this contrived example pretty obviously doesn't reflect reality. If you sell ten bushels at $30, you could probably sell twenty bushels at $20, but you still don't know which is better unless you know the production cost. If it costs $5 per bushel, then selling ten at $30 generates a profit of $250, and selling twenty at $20 generates a profit of $300. If it costs $10 per bushel, then selling at $30 or $20 will both profit $200, but $20 is likely the better price to sell at for two reasons. 1. producing more will generally lower per-unit production costs, so it may only cost $9.50 apiece to produce 20, and 2. a $20 price makes it more likely that you will sell that 21st unit than selling an 11th unit at $30.

If a product has mass appeal, then maximum profit will be realized nearer to the mass production end rather than the restricted production end. There are exceptions, of course, and this is only true where costs are low enough that the product is actually attainable by the masses. But generally the curves play out in a way that makes mass production the most profitable strategy, and doing anything else is leaving money on the table.