Consider the monopoly shown in the diagram at the right. MC a. When the monopoly
ID: 1124379 • Letter: C
Question
Consider the monopoly shown in the diagram at the right. MC a. When the monopoly maximizes profit, what area(s) represent(s) the consumer surplus? O A. C, D, and F O B. A OC. A, B, and E O D. D 0 E, A and B CO 8 b. When the monopoly maximizes profit, what area(s) represent(s) the producer surplus? OA. OB, OC. A. B, and E C, D, and F A, B and C MR 2 Quantity of Natural Gas D. C and D 0 E. B, C, and D c. Compared with the perfectly competitive market-clearing equilibrium, is the monopoly allocatively efficient? 0 A. O B. ° C. No, the monopoly has created a deadweight loss of E, F, and C Yes, the monopoly is allocatively efficient. No, the monopoly has created a deadweight loss of FExplanation / Answer
Answer
the monopoly produces at MR=MC
where
Q=Q1 and the price at the quantity is found from the demand curve which is $P3
a)
Option B
the consumer surplus is the area above price and below the demand curve
and the area is are A
b)
option E
Producer surplus is the area below price and above supply curve and the left of the equilibrium quantity.
=B+C+D
c)
Option D
No, the monopoly created deadweight loss of E+F
the allocative efficient level is at MC=P