Ppt Chapter 6 Market Structure Chapter 8 Competitive Strategy Compared to perfect competition, the consumer surplus in a monopoly a. is unchanged because price and output are the same. b. is higher because price is higher and output is the same. c. is eliminated d. is lower because price is higher and output is lower output and has a compared to a single price monopoly, a perfectly competitive market with the same costs produces a. more; higher price. Figure 10.11 “perfect competition, monopoly, and efficiency” shows that the monopolist charges price p m rather than the competitive price p c; the higher price charged by the monopoly firm reduces consumer surplus. consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. it is.
Monopoly Efficiency Economics Tuition Sg Monopoly vmonopoly v. perfect competitionperfect competition monopoly and perfect competition can be compared contrastedcan be compared contrasted by using consumer surplus and producer surplus (producer surplus (i e by usingi.e. by using economic welfare societal welfare measures). Question: compared to perfect competition, the consumer surplus in a monopoly is unchanged because price and output are the same. is higher because price is higher and output is the same. is eliminated. is lower because price is higher and output is lower. – in a monopoly, consumer surplus is always lower (relative to perfect competition). – but it could be that the increase in the firm’s profit more than o↵sets the decrease in consumer surplus. lower! illustrate graphically. (example with linear demand and marginal cost func tions.) under monopoly pricing: – the firm sets p. Figure 10.3 perfect competition versus monopoly. panel (a) shows the determination of equilibrium price and output in a perfectly competitive market. a typical firm with marginal cost curve mc is a price taker, choosing to produce quantity q at the equilibrium price p. in panel (b) a monopoly faces a downward sloping market demand curve.
Econ 150 Microeconomics – in a monopoly, consumer surplus is always lower (relative to perfect competition). – but it could be that the increase in the firm’s profit more than o↵sets the decrease in consumer surplus. lower! illustrate graphically. (example with linear demand and marginal cost func tions.) under monopoly pricing: – the firm sets p. Figure 10.3 perfect competition versus monopoly. panel (a) shows the determination of equilibrium price and output in a perfectly competitive market. a typical firm with marginal cost curve mc is a price taker, choosing to produce quantity q at the equilibrium price p. in panel (b) a monopoly faces a downward sloping market demand curve. Iii. exceptions to this analysis. there are two possible types of exceptions to the conclusion that perfectly competitive industries are efficient while monopoly industries are inefficient. either (1) perfect competition is not as efficient as thought or (2) monopoly is not as inefficient as thought. The consumer surplus that exists in case of perfect competition gets reduced in case of monopoly; as a part of it goes to the monopolist in the form of monopoly profit, a part of it is lost in the form of deadweight loss while the rest remains as consumer surplus in monopoly.
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