Figure 10-11
In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.What is the size of the deadweight loss prior to Verizon entering the market and what happens to this deadweight loss after Verizon 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 10-11
  In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.What is the size of the deadweight loss prior to Verizon entering the market and what happens to this deadweight loss after Verizon 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 Verizon enters the market, as competition typically reduces prices and increases consumer surplus.

Figure 10-11 in 2011, Verizon Was Granted Permission to Enter