The figure below shows the market equilibrium (point B)at the intersection of demand and supply curves under perfect competition. Figure 10.5 D: Market demand curve
S: Market supply curve
Refer to Figure 10.5.Which of the following regions on the graph represents consumer surplus in a perfectly competitive market?

Question

The figure below shows the market equilibrium (point B)at the intersection of demand and supply curves under perfect competition. Figure 10.5  D: Market demand curve
S: Market supply curve
Refer to Figure 10.5.Which of the following regions on the graph represents consumer surplus in a perfectly competitive market?

Quizplus · Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay. In a perfectly competitive market, consumer surplus is represented by the area above the market price (PS1) and below the demand curve (D) up to the quantity purchased (U1) (PCS1U1B1) and also the area of the triangle formed by the demand curve, the price axis, and the segment from the origin to the market price (PS1) and quantity (U1) (B1PS1U1). Thus, the correct answer is A as it covers both areas representing consumer surplus.

The Figure Below Shows the Market Equilibrium (Point B)at the Intersection