The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, the producer surplus is represented by the area _____.FIGURE 8-7

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price and the marginal cost for each unit sold, summed over all units sold. In this case, it is represented by the area above the supply curve (which represents the marginal cost) and below the price line, up to the level of output where marginal cost equals marginal revenue (i.e. where the monopolist produces). This area corresponds to the sum of areas b and d in the figure, so the correct answer is C.

The Figure Below Shows the Revenue and Cost Curves for a Profit-Maximizing