The above figure shows a market.
-If the market in the figure above is perfectly competitive,consumer surplus is the area ________.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the consumer surplus is given by the area above the market price (which is the same as the marginal cost of production) and below the demand curve. In the figure above, the market price is given by the horizontal line at $8. The demand curve is given by the downward-sloping line labeled D. The point where the demand curve intersects the vertical axis (i.e. Q=54) is also the point where the marginal utility of the last unit consumed is equal to the market price. Therefore, the consumer surplus is given by the area above $8 and below the demand curve up to the point where Q=54. This area is triangle ACG, so the correct answer is C.

The Above Figure Shows a Market