This can be done from a function of social welfare or social surplus.
measurement from a function welfare
A social utility function is a rule or group aggregate levels of individual welfare. Consider the following program is to maximize social welfare:
A social utility function is a rule or group aggregate levels of individual welfare. Consider the following program is to maximize social welfare:
Let the consumption vector of consumer i and 
, the vector of available resources. If you look at a variation of the initial resources
, with corresponding changes in consumption 
, with prices constant, the resolution of this program leads to the result below: 
This result shows that the change in welfare is equal to the variation of resources weighted by price.
Measuring the social surplus
This method is to calculate the social surplus from the cost functions and demand. The surplus Social is defined as the sum of consumer surplus and producer surplus. The method of calculating the social surplus and the loss of welfare due to monopoly is shown in the figure below.
This method is to calculate the social surplus from the cost functions and demand. The surplus Social is defined as the sum of consumer surplus and producer surplus. The method of calculating the social surplus and the loss of welfare due to monopoly is shown in the figure below.
The pricing at marginal cost (MC) is the point F defined by the OA and the price level of output Q *. In this situation, the monopoly was forced to sell at a loss. He recorded a deficit equal to fixed costs ABCD.
The pricing of the average cost is the intersection of the curve of average revenue and average cost (C). This second situation is more favorable the producer than the last, as it covers its production costs, but it causes the decrease in welfare for the community. Indeed, passing from F to C, the consumer surplus is reduced by the surface of the trapezium AFCD, while producer surplus is increased by the rectangle ABCD. The net loss of welfare is the triangle BFC.
The pricing of the average cost is the intersection of the curve of average revenue and average cost (C). This second situation is more favorable the producer than the last, as it covers its production costs, but it causes the decrease in welfare for the community. Indeed, passing from F to C, the consumer surplus is reduced by the surface of the trapezium AFCD, while producer surplus is increased by the rectangle ABCD. The net loss of welfare is the triangle BFC.
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