Answer to Question #98050 in Economics for Solomon

Question

Enumerate the welfare implications under perfect competition and monopoly markets

Answer 1

The monopolist is able to charge a higher price, restrict total output, and thereby reduce welfare because the rise in price reduces consumer surplus.

Under the perfect competition there is no welfare loss, because both consumers and producers are satisfied, society’s resources are allocated in the most efficient way, there is full employment of all factors of production, and the aggregate consumer satis­faction would be maximised.