Figure 15-19
-Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to
A)$0.
B)$1,562.50.
C)$3,125.
D)$6,250.

Question

Figure 15-19 
-Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to
A)$0. 
B)$1,562.50. 
C)$3,125. 
D)$6,250.

Quizplus · Accepted Answer

Consumer surplus is the difference between the maximum price that a consumer is willing to pay and the actual price paid. In this case, the demand curve represents the maximum price that each consumer is willing to pay for a certain quantity of the good. The area above the price line and below the demand curve represents consumer surplus.

If the monopoly firm is not allowed to price discriminate, it can only charge one price for all units sold. This price is determined by the intersection of the demand curve and the marginal cost curve, which is $25 in this case.

Thus, consumer surplus is the area above $25 and below the demand curve, up to the quantity sold. From the graph, we can see that the quantity sold is 100 units.

To calculate the consumer surplus, we need to find the area of the triangle formed by the price line ($25), the vertical axis, and the demand curve up to the quantity sold (100 units). This area is:

(1/2) x ($75 - $25) x 100 = $2,500

Therefore, the consumer surplus amounts to $2,500 or $1,562.50 per unit ($2,500/100 units). Choice B is the correct answer.

Figure 15-19 -Refer to Figure 15-19. If the Monopoly Firm Is Not