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How does a monopoly affect consumer surplus?

Posted on April 17, 2014 at 12:30 AM

A monopolist charges a price higher than a competitive market structure and produces fewer units than a competitive market structure. Because of the higher monopoly price, the area of consumer surplus decreases. Part of the original consumer surplus under competitve conditions will be transferred to the producer. The rest becomes part of the deadweight loss.

This No Bull Review video shows the area of consumer surplus under a monopoly and how it compares to consumer surplus under a perfectly competitive market.

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AP Microeconomics Unit 2 Product Markets

Categories: AP Microeconomics, Micro Unit 2 Product Markets

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