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Social Loss (view source)

Revision as of 02:08, May 12, 2007

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The overall loss to society imposed by a monopoly is thus the sum of all the individual (P-MC) for each good withdrawn from the market.  Because P is a function of output, the P is different for each unit withdrawn from the market as the monopoly raises its price.
 
The overall loss to society imposed by a monopoly is thus the sum of all the individual (P-MC) for each good withdrawn from the market.  Because P is a function of output, the P is different for each unit withdrawn from the market as the monopoly raises its price.
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The social loss can be described easily in graphical form as the area under the demand curve between the points P and MC, and above a price line equal to MC.
    
Here is an example:
 
Here is an example:
Aschlafly
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