The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent. FIGURE 10-6
-Refer to Figure 10-6.Assume this pharmaceutical firm charges a single price for its drug.At its profit-maximizing level of output,consumer surplus is represented by

Question

The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent.  FIGURE 10-6
-Refer to Figure 10-6.Assume this pharmaceutical firm charges a single price for its drug.At its profit-maximizing level of output,consumer surplus is represented by

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay and the actual price they pay. In this case, the profit-maximizing price is P1, and the consumer surplus is represented by the area between the demand curve and the price line up to the profit-maximizing quantity, which is areas D + E. Therefore, the correct choice is C.

The Diagram Below Shows the Demand Curve and Marginal Cost