Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 15 - Part V - Monopoly - Problems and Applications - Page 324: 2

Answer

a) Please see the first graph. b) Please see the second graph.

Work Step by Step

a) The consumer surplus is the triangle labeled $A$. There is no producer surplus since the firms all have the same marginal cost and the firms are producing to the point where the marginal cost curve intersects the demand curve. b) The quantity declines from $Q_{C}$ to $Q_{M}$, and the price increases from $P_{C}$ to $P_{M}$. The consumer surplus declines from the sum of areas $B+C+D+E+F$ to the sum of areas $B+C$. Producer surplus increases to the sum of areas $D+E$ (from no surplus originally), and the producers gain that area from consumers. The deadweight loss is the area $F$.
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