The following figure shows the revenue curves of a monopolist: Figure 24.6 D: Average revenue
MR: Marginal revenue
In Figure 24.6, 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?

Question

The following figure shows the revenue curves of a monopolist: Figure 24.6  D: Average revenue
MR: Marginal revenue
In Figure 24.6, 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?

Quizplus · Accepted Answer

In a perfectly competitive market, the price would be at the intersection of the demand curve and the marginal cost curve, which is at a price of $5,000 in this case. The total consumer surplus can be calculated as the area below the demand curve and above the price, which is (1/2) x (10,000-5,000) x (5,000-0) = $12.5 million. Thus, the amount of consumer surplus in this scenario would be $500,000.

The Following Figure Shows the Revenue Curves of a Monopolist