<p>The consumer rent (area between demand curve and price payed by the consumer) is A under the monopoly and ABC under perfect competition.</p>

<p>The producer rent (area between supply or better marginal cost curve in this case) is BD in the monopoly and DE under perfect competition. </p>

<p>Thus, the monopoly leads to a welfare loss of CE and B is transferred from consumers to the producer. </p>

<p>A isn't transferred, as the monopolist needs to leave some rent to consumers in order to keep them in the market. As an exception under perfect price differentiation, the producer would charge the maximum willingness to pay as a price for each consumer. Thus, would also extract A. But then it becomes rational to produce until Q_C again leading to welfare being the same as under perfect competition but consumer rents fully transferred to the producer.</p>

CC BY-SA 4.0
2020-04-10T09:37:07.090Z
Thank you, what is consumer and producer rent? Is it the same as surplus?
Christopher U
CC BY-SA 4.0
2020-04-10T11:33:20.287Z
Yes, consumer/producer rent and consumer/producer surplus are equivalent.
Jan
CC BY-SA 4.0
2020-04-10T09:30:03.767Z
2020-04-10T09:30:03.767Z
Jan
<p><a href="https://i.sstatic.net/AR1R1.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/AR1R1.png" alt="enter image description here"></a></p>

<p>Hi there,</p>

<p>In the example above, a monopolist sets the price for ice-creams at Pm. The instructor then states that the rectangle B is transferred to the monopolist. What is meant by the rectangle being "transferred" to the monopolist?And why isn't A also transferred to the monopolist?</p>

<p>Thanks.</p>

<monopoly><resource-allocation>
What is the distributional impact of monopoly pricing on consumers?
Christopher U
# What is the distributional impact of monopoly pricing on consumers?

(Asked by: username_0 on 2020-04-10)

[![enter image description here](https://i.sstatic.net/AR1R1.png)](https://i.sstatic.net/AR1R1.png)

Hi there,

In the example above, a monopolist sets the price for ice-creams at Pm. The instructor then states that the rectangle B is transferred to the monopolist. What is meant by the rectangle being "transferred" to the monopolist?And why isn't A also transferred to the monopolist?

Thanks.

**Tags:** monopoly, resource-allocation

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## 1 answers

### Answer by username_1 on 2020-04-10. Score: 1 | Accepted answer

The consumer rent (area between demand curve and price payed by the consumer) is A under the monopoly and ABC under perfect competition.

The producer rent (area between supply or better marginal cost curve in this case) is BD in the monopoly and DE under perfect competition.

Thus, the monopoly leads to a welfare loss of CE and B is transferred from consumers to the producer.

A isn't transferred, as the monopolist needs to leave some rent to consumers in order to keep them in the market. As an exception under perfect price differentiation, the producer would charge the maximum willingness to pay as a price for each consumer. Thus, would also extract A. But then it becomes rational to produce until Q\_C again leading to welfare being the same as under perfect competition but consumer rents fully transferred to the producer.

> **Comments:**
> **username_0**: Thank you, what is consumer and producer rent? Is it the same as surplus?  
> **username_1**: Yes, consumer/producer rent and consumer/producer surplus are equivalent.  

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