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Figure: The Profit-Maximizing Output and Price
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a perfectly competitive industry, total surplus is:
A) $200.
B) $1,600.
C) $3,200.
D) $6,400.

Question

Use the following to answer questions:
Figure: The Profit-Maximizing Output and Price 
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a perfectly competitive industry, total surplus is:
A) $200. 
B) $1,600. 
C) $3,200. 
D) $6,400.

Quizplus · Accepted Answer

In a perfectly competitive market, total surplus is maximized at the equilibrium where supply equals demand. Given that AC = MC = $200 and assuming the equilibrium quantity is 32 (since $200 x 32 = $6,400), the total surplus is the area under the demand curve above the price, which is $6,400.

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