Exhibit 15.3

-Refer to Exhibit 15.3,which shows the cost and revenue curves for a monopolist.The increase in consumer surplus when price is set equal to marginal cost rather than at the profit-maximizing level is shown by area _____

Question

Exhibit 15.3
 
-Refer to Exhibit 15.3,which shows the cost and revenue curves for a monopolist.The increase in consumer surplus when price is set equal to marginal cost rather than at the profit-maximizing level is shown by area _____

Quizplus · Accepted Answer

When price is set equal to marginal cost rather than at the profit-maximizing level, the price decreases, leading to an increase in consumer surplus. The area under the demand curve and above the price level represents consumer surplus. Thus, moving from the profit-maximizing price to the price equal to marginal cost increases consumer surplus by the area bcfd, as it captures the additional surplus consumers receive due to the lower price and higher quantity consumed.

Exhibit 15.3 -Refer to Exhibit 15.3,which Shows the Cost and Revenue Curves