Figure 15-6
-Refer to Figure 15-6.Compared to a perfectly competitive market,consumer surplus is lower in a monopoly by an amount equal to the

Question

Figure 15-6 
-Refer to Figure 15-6.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, and consumer surplus is maximized. In a monopoly, however, the single seller has the power to set the price of the good, and consumer surplus is reduced by the amount of the monopoly profit. In Figure 15-6, the area P1P2EF represents the reduction in consumer surplus in a monopoly compared to a perfectly competitive market.

Figure 15-6 -Refer to Figure 15-6.Compared to a Perfectly Competitive Market,consumer Surplus