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The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
This means that the amount of consumer surplus, the area below the demand curve and above the price, will be lower. [4] The change in overall social surplus of the market depends on whether the increase in producer surplus due to lower production costs is larger or smaller than the fall in consumer surplus due to higher prices. Note that it is ...
The consumer's surplus is highest at the largest number of units for which, even for the last unit, the maximum willingness to pay is not below the market price. Consumer surplus can be used as a measurement of social welfare, shown by Robert Willig. [8] For a single price change, consumer surplus can provide an approximation of changes in welfare.
The total surplus of perfect competition market is the highest. And the total surplus of imperfect competition market is lower. In the monopoly market, if the monopoly firm can adopt first-level price discrimination, the consumer surplus is zero and the monopoly firm obtains all the benefits in the market. [15]
The producer surplus always decreases, but the consumer surplus may or may not increase; however, the decrease in producer surplus must be greater than the increase, if any, in consumer surplus. Deadweight loss can also be a measure of lost economic efficiency when the socially optimal quantity of a good or a service is not produced.
(Reuters) - China's Alibaba said on Friday it had agreed to pay $433.5 million to settle a U.S. class-action lawsuit filed by investors alleging monopolistic practices by the e-commerce giant.
Consumer surplus need not exist, for example in monopolistic markets where the seller can price above the market clearing price. Alternatively, should fixed costs or economies of scale raise the marginal cost of adding more consumers higher than the marginal profit from selling more product, consumer surplus may be captured by the seller. This ...
The purpose of price discrimination is to transfer consumer surplus to the producer. [46] Consumer surplus is the difference between the value of a good to a consumer and the price the consumer must pay in the market to purchase it. [47] Price discrimination is not limited to monopolies.