[MUSIC] Let's continue our comparison of monopoly and perfect competition with a numerical example that I introduced earlier. Again, we have a demand curve 150-Q, which means marginal revenue is 150-2Q. We have our total cost curve, and the marginal cost is equal to Q. We already found the monopoly profit maximizing output at 50 units and price at 100. Now we'll go ahead and we'll calculate what the perfectly competitive output would be. We know the rule for perfect competition. In perfect competition, we get production where price is equal to marginal cost. What is price? That is our demand curve. So we have 150-Q. And our marginal cost is just given as equal to Q. So we get 150 is equal to 2Q, or Q = 75. So the perfectly competitive output, this output here, is 75 units. And what is the corresponding price? Well, we can take this quantity of 75, and plug it back into the demand curve, and we get the competitive price is 150 minus 75, or $75 a unit. So this price here is equal to 75. I'm going through this numerical example to prove to you algebraically with this example that indeed monopolies are better off under the situation of monopoly, that consumers are better off under the perfectly competitive environment, and that society as a whole is better off under perfect competition. So the next step is to calculate consumer surplus, producer surplus, and total surplus under these two environments. Why don't you try to do it by yourself and then join me and we'll go through these numbers together. Let's calculate consumer surplus, producer surplus, and total surplus in the case of a monopolist and in the case of the perfectly competitive firm. Consumer surplus is the area underneath the demand curve and above the price. So in this case, it's the height, 150-100, times the base, which is 50 divided by 2, and we get that it's 1250. Producer surplus is slightly more complicated. It's a trapezoid. It is the area underneath the price and above the marginal cost curve, up to the monopolist output. And an area of a trapezoid, it's this, which is 100, plus this, which is 50, times the base, which is 50, divided by 2. So we get (100+50)50, divided by 2, and this is 3750. Total surplus is the sum of the two, so adding 1250 and 3750, we get a total surplus that is equal to 5000. And if we're measuring this in dollars, this would be $5,000. What about the perfectly competitive environment? Consumer surplus of course will be larger, again, because the price is lower and the quantity is bigger, it will be this bigger triangle here. And we can find this area, it's the height 75 times the base, which is 75, divided by 2, and we get 75 times 75 divided by 2, which is 2812.5. What about producer surplus? Now, that's a triangle as well. It's the area underneath the price and above the marginal cost curve. It is this whole triangle here. And again, the height here is 75. The base is 75 divided by 2. And just because these are the numbers that I chose, we get that producer surplus in this case is equal to consumer surplus. That is just because I used things, a demand curve and a marginal cost curve with a slope of 1. There wasn't really any reason for that. But we get that the producer surplus is also 2812.5. What's important for me to emphasize is that the consumer surplus was clearly bigger under the perfectly competitive environment, and producer surplus was clearly bigger in the case of the monopolist. What about the total surplus? The total surplus is the sum of the consumer surplus and the producer surplus. And in the case of a monopolist, we get that it's $5,625. And lo and behold, as I predicted, it is bigger than under the case of the monopolist.