1
$\begingroup$

Is there any way to compare the total surplus and consumer/producer surplus in monopolistic competition with that of perfect competition or monopoly?

All I can come up with is the idea that deadweight loss would be lower in monopolistic competition if both faced the same demand curves and costs. This seems correct, seeing as the demand curve 'shifts inwards', but I can't give a formal proof for this, and anyway monopolistic competition should have a more elastic demand curve than the monopolist.

Thanks for your help in this!

enter image description hereenter image description here

$\endgroup$
2
  • 2
    $\begingroup$ Not sure how you define consumer surplus in the case of monopolistic competition, as the goods sold are not homogenous, so there is no single demand function. Can you please clarify? Also, how do you factor in the role of competitor's prices? $\endgroup$
    – Giskard
    Jan 7, 2022 at 21:07
  • $\begingroup$ @Giskard you know what, that's something I hadn't considered! that pretty much answers my question - the answer being that you can't simply calculate consumer and producer surplus. If you know of anything yourself in this area in terms of modelling aggregate market demand, that would be great but thanks for your help! $\endgroup$
    – Evan
    Jan 7, 2022 at 22:57

0

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.