Exhibit 9-11
-In Exhibit 9-11, for a monopolist that does not price discriminate, consumer surplus at the profit-maximizing level of output is
A) the area under the demand curve bounded above a price of $136
B) the area under the demand curve bounded by average total cost of $110
C) the area under the marginal revenue curve bounded by a marginal revenue of $60
D) $0
E) equal to total consumer expenditure

Question

Exhibit 9-11 
-In Exhibit 9-11, for a monopolist that does not price discriminate, consumer surplus at the profit-maximizing level of output is
A) the area under the demand curve bounded above a price of $136 
B) the area under the demand curve bounded by average total cost of $110 
C) the area under the marginal revenue curve bounded by a marginal revenue of $60 
D) $0 
E) equal to total consumer expenditure

Quizplus · Accepted Answer

Consumer surplus is calculated as the area under the demand curve and above the price paid by consumers. Since a monopolist that does not price discriminate charges a price higher than the marginal cost, the price charged will be higher than the average total cost. Therefore, option B is incorrect. The monopolist's marginal revenue curve lies below the demand curve, so option C is incorrect. Since the monopolist produces where marginal cost equals marginal revenue, the price charged will be higher than the marginal cost, resulting in a deadweight loss and zero consumer surplus. Therefore, option D is incorrect. Finally, consumer expenditure is equal to the price times the quantity demanded, which is not the same as consumer surplus, so option E is incorrect. The correct answer is therefore option A.

Exhibit 9-11 -In Exhibit 9-11, for a Monopolist That Does Not Price