Consider the first graph (the one capturing electricity use) and answer each of
ID: 1128635 • Letter: C
Question
Consider the first graph (the one capturing electricity use) and answer each of the following six questions worth two points each. Identify the areas by letters at the corner points (3 letters for a triangle, 4 for a rectangle, etc).
a) If this were a perfectly competitive firm Consumer Surplus = area ________________
b) If this were a perfectly competitive firm Producer Surplus = area ________________
c) If this were a perfectly competitive firm Deadweigh Loss = area ________________
d) If this were a single price monopolist Consumer Surplus = area ________________
e) If this were a single price monopolist Producer Surplus = area ________________
f) If this were a single price monopolist Deadweight Loss = area ________________
MC = AC MR 500 600 800 1,200 Q Megawatts of electricity produced by Ohio EdisonExplanation / Answer
Answer
a)
The perfectly competitive firm produces at MC=P
where
Q=800
and P=$F
CS=area above price and below demand curve
=area AFC
b)
Producer surplus is the area above MC and below price
=zero=nothing=NA
c)
deadweight loss is the area be which welfare decreases but in perfect competition, there is no loss of welfare.
=NA
d)
Monopolist produces MR=MC
where
Q=500
and the price is found at the same on the demand curve
P=$G
CS=area AGB
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