monopoly mkt failure - Economic Welfare: Monopoly v....

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Economic Welfare: Monopoly v. Perfect Competition
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Agenda Societal Welfare/Economic Welfare: Criteria Consumer Surplus Producer Surplus Compare Monopoly and Perfect Competition Price Discrimination
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Economic Welfare Consumer surplus measures economic welfare from the buyer/consumer perspective. Producer surplus measures economic welfare from the seller/producer perspective.
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Consumer Surplus Consumer surplus is the amount a buyer is willing to pay for a product minus the amount the buyer actually pays. Consumer surplus is the area below the demand curve and above the market price. o A lower market price will increase consumer surplus. o A higher market price will reduce consumer surplus.
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Producer Surplus Producer surplus is the amount a seller is paid for a product minus the total variable cost of production. Producer surplus is equivalent to economic profit in the long run.
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Economic Welfare Economic welfare can be quantified as the sum of consumer surplus and producer surplus, i.e. equal weights assumed.
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monopoly mkt failure - Economic Welfare: Monopoly v....

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