Suppose that the demand for a product produced and sold by a single U.S. firm in the U.S. market is Q_USUS = 10 !2P_US, where output is in million of units. If the marginal cost of production is $2 per unit, the value of consumer surplus in the U.S. market is:

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between the total amount consumers are willing to pay for a good and the amount they actually pay. In this case, the total amount consumers are willing to pay is given by the demand curve, which is Q_USUS = 10 !2P_US. The amount they actually pay is given by the marginal cost of production, which is $2 per unit. So, consumer surplus is:CS = ∫(P_US - MC)dQ= ∫(10 - 2)dQ= 8Q= 8(10)= $80 millionTherefore, the value of consumer surplus in the U.S. market is $80 million.

Suppose That the Demand for a Product Produced and Sold