Figure 8.10
-Refer to Figure 8.10.Compared to a perfectly competitive market,consumer surplus is lower in a monopoly by an amount equal to the -.

Question

Figure 8.10 
-Refer to Figure 8.10.Compared to a perfectly competitive market,consumer surplus is lower in a monopoly by an amount equal to the -.

Quizplus · Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. In a perfectly competitive market, the price of a good is determined by the interaction of supply and demand. In a monopoly, however, the single seller has the power to set the price of the good. This allows the monopolist to charge a higher price than the competitive price, which reduces consumer surplus. The area P1P2EF represents the reduction in consumer surplus in a monopoly compared to a perfectly competitive market.

Figure 8.10 -Refer to Figure 8.10.Compared to a Perfectly Competitive Market,consumer Surplus