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with the aid of approriate illustrations showed that breaking up monopoly increase social welfare.

with the aid of approriate illustrations showed that breaking up monopoly increase social welfare.

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  • In a monopoly, the consumer surplus is reduced, since one firm controls the market, hence they regulate prices and price levels are higher, with quantity supplied being less. The average revenue(AR) = demand(D), which is always above the marginal revenue(MR) curve.
  • In case of breaking up a monopoly, the average revenue will be equal to the marginal revenue and the demand curve, since, the market will be more competetive, owing to the fact that there are more firms, and hence a free market. This would ensure that, the price levels are lower and a greater quantity of goods or services are produced. This increases the consumer surplus, and hence social welfare.


    Here, Pm represents Price level in a monopoly, while Pc represents Price level in a competitive market.
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