Figure 13.7

Assume Shaw Cable has a monopoly to provide cable TV in Vancouver. Figure 13.7 shows the cable television market in Vancouver.
-Refer to Figure 13.7.What is the size of the deadweight loss prior to Telus entering the market and what happens to this deadweight loss after Telus does enter the market?
A)The deadweight loss of area D is converted to consumer surplus.
B)The deadweight loss of area C + D is converted to consumer surplus.
C)The deadweight loss of area D is converted to producer surplus.
D)The total deadweight loss is the area D + F; D is converted to consumer surplus and F to producer surplus.

Question

Figure 13.7
  
Assume Shaw Cable has a monopoly to provide cable TV in Vancouver. Figure 13.7 shows the cable television market in Vancouver.
-Refer to Figure 13.7.What is the size of the deadweight loss prior to Telus entering the market and what happens to this deadweight loss after Telus does enter the market?
A)The deadweight loss of area D is converted to consumer surplus. 
B)The deadweight loss of area C + D is converted to consumer surplus. 
C)The deadweight loss of area D is converted to producer surplus. 
D)The total deadweight loss is the area D + F; D is converted to consumer surplus and F to producer surplus.

Quizplus · Accepted Answer

The deadweight loss of area D is converted to consumer surplus when Telus enters the market, as competition typically reduces prices and increases consumer surplus.

Figure 13.7 Assume Shaw Cable Has a Monopoly to Provide Cable TV