Unformatted text preview: produced at point e 1 which is the lowest point on the average cost line. Therefore competition makes fuller utilization of the productive capacity. Under monopoly output is produced at point S which is on the falling phase of AC. This shows underutilization of the productive capacity. Finally, the size of the Consumer’s Surplus under competition is as large as De 1 P 1 while that under monopoly is only DRP 2 . Hence under monopoly there is higher price, lower output, underutilization of productive capacity or wastage of resources and reduction in Consumer’s Surplus. Such evils or wastage under monopoly are also present more or less in every other imperfect market with a lower degree of competition....
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This note was uploaded on 11/26/2011 for the course ECONOMIC ec 201 taught by Professor - during the Fall '10 term at Montgomery.
- Fall '10