The following figure shows the revenue curves of a monopolist:
Figure 11.6
D: Average revenue
MR: Marginal revenue
-In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are 0. What would be the amount of consumer surplus if the market was perfectly competitive?
A)$1,000,000
B)$500,000
C)$300,000
D)$250,000
E)$350,000

Question

The following figure shows the revenue curves of a monopolist:
Figure 11.6
  D: Average revenue
MR: Marginal revenue
-In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are 0. What would be the amount of consumer surplus if the market was perfectly competitive?
A)$1,000,000 
B)$500,000 
C)$300,000 
D)$250,000 
E)$350,000

Quizplus · Accepted Answer

In a perfectly competitive market, the price would be equal to the marginal cost ($2,500) at the quantity where the demand curve intersects the marginal cost curve (Q = 5,000). At this price, the consumer surplus would be the area below the demand curve and above the price, up to the quantity of Q = 5,000.

Consumer Surplus = 0.5 x (10,000 - 5,000) x (15,000 - 10,000) = $500,000

Therefore, the answer is B) $500,000.

The Following Figure Shows the Revenue Curves of a Monopolist