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Analysis of Consumer Surplus in Monopoly vs. Competitive Market

This analysis explores the graphical representation of consumer demand and marginal cost, set at zero. It examines the price and quantity outcomes in both monopolistic and competitive environments. Key focus areas include consumer surplus comparisons and the implications of monopoly power. The report highlights the transfer of consumer surplus in monopoly situations and the presence of deadweight loss, providing graphical annotations to illustrate these concepts and their economic significance.

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Analysis of Consumer Surplus in Monopoly vs. Competitive Market

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  1. $ D Q MC = 0

  2. In the graph we have the demand from consumers and we see the marginal cost of production is 0. So in the graph the price and quantity that would occur in both a monopoly situation and in a competitive environment. Compare the consumer surplus between the monopoly and competitive situations. Comment on the monopoly transfer and the deadweight loss (show where they are in the graph and explain what they mean.

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