The following figure depicts a generalized downward-sloping market demand (D)curve for a product.It also shows the firm's relevant marginal revenue (MR)curve and marginal cost (MC)curve.Use this figure to answer the following questions:

-For a perfectly competitive market,what would the producer surplus be?
A) $160
B) $120
C) $80
D) $40
E) $0

Question

The following figure depicts a generalized downward-sloping market demand (D)curve for a product.It also shows the firm's relevant marginal revenue (MR)curve and marginal cost (MC)curve.Use this figure to answer the following questions:
 
-For a perfectly competitive market,what would the producer surplus be?
A) $160 
B) $120 
C) $80 
D) $40 
E) $0

Quizplus · Accepted Answer

In a perfectly competitive market, the producer surplus is zero because the firms in the market are price-takers and can only earn profits equal to their marginal cost. In the given figure, the marginal cost curve intersects the demand curve at point P, which determines the market price. At this price, the producer surplus is zero for the perfectly competitive firm, as shown in the figure.

The Following Figure Depicts a Generalized Downward-Sloping Market Demand (D)curve