Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 0, how much total consumer surplus would consumers receive in this market?
A)10
B)20
C)50
D)100

Question

Quizplus · Accepted Answer

To find the total consumer surplus, we need to find the area of the triangle below the demand curve and above the market price (which is equal to the marginal cost of 0). The equilibrium quantity can be found by setting MR=MC, which gives Q=10. The equilibrium price can be found by plugging Q=10 into the demand equation, which gives P=10. Thus, the base of the triangle is 10 and the height is (20-10)=10. The area of the triangle is (1/2)*10*10=50, which represents the total consumer surplus. Therefore, the answer is C.

Scenario 16-2 Suppose Market Demand for a Product Is Given by the by the Equation