FIGURE 12-3
-Refer to Figure 12-3. Comparing the monopoly equilibrium to the perfectly competitive equilibrium, the area representing the gain in producer surplus due to monopoly is outlined by
A) P1P3CA less ACE.
B) P2P3CB less ABE.
C) P0P3CA less ACE
D) P3P4 less ABE.
E) P2P4E.

Question

FIGURE 12-3
-Refer to Figure 12-3. Comparing the monopoly equilibrium to the perfectly competitive equilibrium, the area representing the gain in producer surplus due to monopoly is outlined by
A) P1P3CA less ACE. 
B) P2P3CB less ABE. 
C) P0P3CA less ACE 
D) P3P4 less ABE. 
E) P2P4E.

Quizplus · Accepted Answer

The gain in producer surplus due to monopoly is the difference between the monopoly equilibrium producer surplus (outlined by P2P3CB) and the perfectly competitive equilibrium producer surplus (outlined by ABE). This is because in a monopoly, the producer faces a downward sloping demand curve and can charge a higher price, leading to a higher producer surplus. Therefore, P1 and P0 are not relevant in this calculation, and neither is the area outlined by P3P4.

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