FIGURE 12-3
-Refer to Figure 12-3. Comparing the perfectly competitive equilibrium to the monopoly equilibrium, the reduction in consumer surplus due to monopoly is outlined by
A) P2EP4.
B) P2ECP3.
C) BCE.
D) q1CEq2.
E) P2P3E.

Question

FIGURE 12-3
-Refer to Figure 12-3. Comparing the perfectly competitive equilibrium to the monopoly equilibrium, the reduction in consumer surplus due to monopoly is outlined by
A) P2EP4. 
B) P2ECP3. 
C) BCE. 
D) q1CEq2. 
E) P2P3E.

Quizplus · Accepted Answer

Consumer surplus is the triangle bounded by the demand curve, the price line, and the vertical axis. In the perfectly competitive equilibrium, consumer surplus is the triangle P2ECP3, while in the monopoly equilibrium, consumer surplus is reduced to BCE. Therefore, the reduction in consumer surplus due to monopoly is the area P2ECP3 minus the area BCE, which is represented by choice B.

FIGURE 12-3 -Refer to Figure 12-3. Comparing the Perfectly Competitive Equilibrium to Equilibrium