Use the following to answer questions:
Figure: PPV
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company is a single-price monopoly and maximizes profit, producer surplus will be:
A) $0.
B) $45.
C) $70.
D) $90.

Question

Use the following to answer questions:
Figure: PPV 
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company is a single-price monopoly and maximizes profit, producer surplus will be:
A) $0. 
B) $45. 
C) $70. 
D) $90.

Quizplus · Accepted Answer

The producer surplus for a monopoly is the area between the price and the marginal cost curve up to the quantity produced. Since the marginal cost is constant at $40, the producer surplus is the difference between the price the monopoly charges and the marginal cost, multiplied by the quantity sold. The correct calculation based on the given options results in a producer surplus of $90.

Use the Following to Answer Questions