Consumer Surplus and Prices in Perfect Competition and Monopoly

8 Pages Posted: 25 Apr 2013 Last revised: 25 Jan 2014

Date Written: April 24, 2013

Abstract

It is well known that existence of monopoly is accompanied by economic inefficiency in the form of dead weight loss and reduced consumer surplus. 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. This paper shows that under specific conditions there is a definite relationship (in case of monopoly) between monopoly profit, dead weight loss and consumer surplus and between prices in perfect competition and monopoly.

Keywords: Perfect Competition, Monopoly, Consumer Surplus, Dead Weight Loss, Monopoly Profit, Price

JEL Classification: D41, D42

Suggested Citation

Misra, Suryaprakash, Consumer Surplus and Prices in Perfect Competition and Monopoly (April 24, 2013). Available at SSRN: https://ssrn.com/abstract=2256073 or http://dx.doi.org/10.2139/ssrn.2256073

Suryaprakash Misra (Contact Author)

NALSAR University of Law ( email )

Justice City, Shameerpet
R.R. District -500078
Hyderabad, Andhra Pradesh 500078
India

HOME PAGE: http://nalsar.ac.in/faculty/sp%20misra%20-%20profile.html

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