In market A, a firm with market power faces an inverse demand curve of P = 10 - Q and a marginal cost that is constant at $2. In market B, a firm with market power faces an inverse demand curve of P = 8 - 0.75Q and a marginal cost of $2. Producer surplus in market A is _____ than in market B.
A) $8 higher
B) $4 higher
C) $2 lower
D) $1 lower
Correct Answer:
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