Exhibit 9.12

-Refer to Exhibit 9.12,which shows the cost and revenue curves faced by a profit-maximizing monopolist.The rectangle pbdp' reflects _____

Question

Exhibit 9.12

-Refer to Exhibit 9.12,which shows the cost and revenue curves faced by a profit-maximizing monopolist.The rectangle pbdp' reflects _____

Quizplus · Accepted Answer

The rectangle pbdp' reflects the transfer from consumer surplus to monopoly profit. This is because the monopolist is setting the price higher than the marginal cost, resulting in a smaller quantity demanded (Qm) and a higher price (Pm). The area of the rectangle represents the monopoly profit, and it is obtained by multiplying the price (Pm - Pc) by the quantity (Qm). Thus, the monopolist is able to capture some of the surplus that would have gone to consumers in a perfectly competitive market.

Exhibit 9.12 -Refer to Exhibit 9.12,which Shows the Cost and Revenue Curves