SCENARIO: HOME MONOPOLIST
A monopolist faces a demand curve given by P = 60 -2Q and has total
Costs given by TC = Q2.Its marginal revenue is MR = 60 - 4Q and its
Marginal cost is MC = 2Q.
Reference: Ref 95
(Scenario: Home Monopolist) Compared with the notrade equilibrium,
Consumer surplus ___________ when the monopolist engages in free
Trade.

Question

SCENARIO: HOME MONOPOLIST
A monopolist faces a demand curve given by P = 60 -2Q and has total
Costs given by TC = Q2.Its marginal revenue is MR = 60 - 4Q and its
Marginal cost is MC = 2Q.
Reference: Ref 9­5
(Scenario: Home Monopolist) Compared with the no­trade equilibrium,
Consumer surplus ___________ when the monopolist engages in free
Trade.

Quizplus · Accepted Answer

When the monopolist engages in free trade, the quantity supplied will increase above the quantity supplied at the no-trade equilibrium. This will lower the price the monopolist charges, resulting in an increase in consumer surplus. Therefore, the correct answer is A) increases.

SCENARIO: HOME MONOPOLIST A Monopolist Faces a Demand Curve Given by P =