Concept: Consumer and Producer Surplus Question H Suppose a local cable company

Question

Concept: Consumer and Producer Surplus Question H Suppose a local cable company provides cable service to a rural community. The figure to the right illustrates the cable company's marginal cost of providing cable service along with the community's demand for cable TV Assume the local cable company is a monopoly. When he company maximizes profits, consumer surplus equals S real number rounded to one decimal place) 90 8 enter a nur enc res se usng a 60- 20- 10- MR 0 10 20 30 40 50 60 70 80 90 100 Quantity of cable subscriptions

Explanation / Answer

Answer

The monopoly produces at MR=MC

where

Q=25

P=$75.............the price is found by demand curve at the Q

Consumer surplus it sht area above price and below demand curve

=0.5*(100-75)*25

=312.5

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