Use the following to answer question:
Figure: The Profit-Maximizing Output and Price
-(Figure: The Profit-Maximizing Output and Price)Use Figure: The Profit-Maximizing Output and Price.Assume that there are no fixed costs and AC = MC = $200.If this were a perfectly competitive industry,consumer surplus would be:
A)$0.
B)$6,400.
C)$1,600.
D)$3,200.

Question

Use the following to answer question:
Figure: The Profit-Maximizing Output and Price 
-(Figure: The Profit-Maximizing Output and Price)Use Figure: The Profit-Maximizing Output and Price.Assume that there are no fixed costs and AC = MC = $200.If this were a perfectly competitive industry,consumer surplus would be:
A)$0. 
B)$6,400. 
C)$1,600. 
D)$3,200.

Quizplus · Accepted Answer

Consumer surplus in a perfectly competitive market is the area above the market price and below the demand curve. In this case, the equilibrium price is $600 (where MR = MC). The demand curve intersects the vertical axis at $800, so the consumer surplus is the area of the triangle formed by the points (0,800), (0,600), and (400,600).
Consumer surplus = (1/2) x (400) x (800-600) = $6,400.

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