Use the following to answer questions:
-(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is one of many firms in a competitive industry, what is consumer surplus in the long run?
A) $4
B) $10
C) $180
D) $360

Question

Use the following to answer questions: 
-(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is one of many firms in a competitive industry, what is consumer surplus in the long run?
A) $4 
B) $10 
C) $180 
D) $360

Quizplus · Accepted Answer

In the long run, in a perfectly competitive market, firms produce where price equals marginal cost. If the price is $4 (equal to marginal cost), consumer surplus is the area above the price and below the demand curve. Assuming the demand curve is linear and given the options, $180 is the likely consumer surplus.

Use the Following to Answer Questions