Homework: Chapter 15 Homework (Copy 2) Save Score: 0 of 1 pt 14 of 20 (17 comple
ID: 1116881 • Letter: H
Question
Homework: Chapter 15 Homework (Copy 2) Save Score: 0 of 1 pt 14 of 20 (17 complete) HW Score: 78.33%, 15.67 of 20 pts Concept: Consumer and Producer Surplus Question Help 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 MC Assume the local cable company is a monopoly When the company maximizes profits, consumer surplus equals S 200 (enter a numeric response using a real number rounded to one decimal place), and producer surplus equals S 600 Compared to the perfectly competitive market outcome, the cable company creates dead weight loss equal to $ 50 MR 0 10 20 30 40 50 60 70 80 90 100 Quantity of cable subscriptions Enter your answer in the answer box and then click Check Answer All parts showing Clear All Check AnswerExplanation / Answer
Answer
Consumer surplus is the area above price and below demand curve
producer surplus is the area below price and above MC
the equilibrium for monopoly is at MR=MC
where
P=$80 and Q=20 units
CS=0.5*(100-80)*20=$200.0
PS=0.5*(60-40)*20+(80-60)*20=$600.0
the efficient quantity is MC=P
where Q=30
The deadweight loss=0.5* change in quantity*difference between price at the quantities*0.5*(80-60)*(30-20)
=$100.0
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