Use the following to answer question(s): Correcting for Market Failure: Imperfect Competition

-(Exhibit: Correcting for Market Failure: Imperfect Competition) If the government intervenes to induce the imperfectly competitive firm shown in this exhibit to produce at the efficient level of output, the gain will be _______ and the cost will be ________.
A) RUVW; RTVW
B) RTVW; RUVW
C) RW; VW
D) UT; RT

Question

Use the following to answer question(s): Correcting for Market Failure: Imperfect Competition
 
-(Exhibit: Correcting for Market Failure: Imperfect Competition) If the government intervenes to induce the imperfectly competitive firm shown in this exhibit to produce at the efficient level of output, the gain will be _______ and the cost will be ________.
A) RUVW; RTVW 
B) RTVW; RUVW 
C) RW; VW 
D) UT; RT

Quizplus · Accepted Answer

The gain from government intervention to induce production at the efficient level of output is represented by the area RUVW, which is the additional social surplus (consumer plus producer surplus) generated by moving from the monopolistic output level to the efficient output level. The cost of this intervention is represented by the area RTVW, which is the deadweight loss eliminated by moving to the efficient output level.

Use the Following to Answer Question(s): Correcting for Market Failure