Scenario 16-3
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-3.If the marginal cost of producing this good is 4,how much total consumer surplus would consumers receive in this market?

Question

Quizplus · Accepted Answer

To find the total consumer surplus, we first need to find the equilibrium quantity and price. Equating MR and MC, we get:

20 - 2Q = 4

Solving for Q, we get Q = 8.

Substituting Q in the demand equation, we get:

P = 20 - 8 = 12

So, the equilibrium price is 12 and the equilibrium quantity is 8.

Total consumer surplus is the area below the demand curve and above the equilibrium price, up to the equilibrium quantity.

Total consumer surplus = 0.5*(20-12)*8 = 32

Therefore, the correct answer is C.

Scenario 16-3 Suppose Market Demand for a Product Is Given by the by the Equation