Any price control in the energy sector will lead to question...

Any price control in the energy sector will lead to: Question 15 options: A change in social surplus A change in producer surplus only A change in consumer surplus only The same outcome as before

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Transcript

00:01 So here we need to talk about monopoly and competition.

00:04 So let's start off by drawing a market.

00:06 A market is a story about quantity and price.

00:10 We have a demand curve.

00:11 And let's suppose that the supply curve equals to the marginal cost curve is constant, right? so the competitive equilibrium, right, is going to be here.

00:21 Competition.

00:24 And this gives you the competitive quantity.

00:27 Now the monopolist is going to say, well, actually, i'm going to set marginal revenue equals to marginal cost, and i'm going to charge up here and here.

00:39 So the competitive price is just the marginal cost because you can't make profits in competition.

00:46 Otherwise, people will come seeking those profits and driving you out.

00:49 But the monopolist can.

00:50 The monopolist can restrict supply to jack up the price because there's nobody competing with them, right? so clearly there's going to be a massive loss in consumer surplus, right? if we look at this is the new consumer surplus.

01:06 It is much less, right? consumers are paying more for less.

01:13 That's not a good bargain, right? the monopoly is jacking up the price to extract surplus from the consumers.

01:20 So the consumer surplus has got to be smaller.

01:23 The price has got to be higher.

01:27 Output has got to be lower...