This recent question about when monopoly is undesirable made me curious about when monopoly is actually desirable? I was reminded of an argument for the efficiency of monopolies when moral hazard effects create a backward-bending supply curve in competition, like in healthcare perhaps. But, for the life of me, I cannot remember exactly how this was justified or if I am just imagining the whole thing. Is anyone familiar with arguments like this?
I know you can create a backward bending marginal cost curve and then with the usual linear marginal revenue curve, you might have MR=MC at a greater quantity than where demand intersects marginal cost, but I don't understand how the backward bending supply is also a a marginal cost curve--then the curve isn't even a proper function.
Information is a funny thing, so I wouldn't be surprised if incomplete information made for strange results.
Edit: I am thinking of pictures like these. I am just having a hard time reconstructing the jump from a backwards bending supply or demand curve (I understand these--this is often taught in 101), I just don't understand the MB/MC interpretation below where it seems like you might get a higher equilibrium quantity with monopsony or monopoly.
For these to make sense, MC and MB can't be functions of quantity unless I have a marginal cost in each direction? As in I could sell $q_1$ at a high price a low price, so am I approaching from above or below.