Use the following to answer questions:
Figure: Regulated versus Unregulated Monopolist
-(Figure: Regulated versus Unregulated Monopolist) Refer to the figure. Calculate consumer surplus when this monopoly is regulated.
A) $6,400
B) $2,800
C) $3,600
D) $400

Question

Use the following to answer questions:
Figure: Regulated versus Unregulated Monopolist 
-(Figure: Regulated versus Unregulated Monopolist) Refer to the figure. Calculate consumer surplus when this monopoly is regulated.
A) $6,400 
B) $2,800 
C) $3,600 
D) $400

Quizplus · Accepted Answer

When the monopoly is regulated, the price is set where the demand curve intersects the average cost curve. The consumer surplus is the area of the triangle above this price and below the demand curve, which is calculated as 0.5 * base * height = 0.5 * 80 * 160 = $6,400.

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