Exhibit 15.1

-Refer to Exhibit 15.1,which shows the cost and revenue curves for a natural monopolist-the operator of a subway system.The consumer surplus that results if the monopoly is unregulated is shown by the _____

Question

Exhibit 15.1
 
-Refer to Exhibit 15.1,which shows the cost and revenue curves for a natural monopolist-the operator of a subway system.The consumer surplus that results if the monopoly is unregulated is shown by the _____

Quizplus · Accepted Answer

The consumer surplus that results if the monopoly is unregulated is shown by the triangular area abc. This is because consumer surplus is the difference between the maximum price consumers are willing to pay and the actual price paid, summed over all units of the good consumed. In this case, the demand curve represents the maximum price consumers are willing to pay, and the actual price paid is shown by the monopoly's marginal revenue curve. The triangular area abc is the difference between the demand curve and the marginal revenue curve, summed over all units of the good consumed, which is the consumer surplus.

Exhibit 15.1 -Refer to Exhibit 15.1,which Shows the Cost and Revenue Curves