The following figure shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist.
Figure 11-1
-Based on Figure 11-1,competitive firms will receive producer surplus equal to area:
A)ACFH.
B)EIF.
C)AVF.
D)AWEH.

Question

The following figure shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist.
Figure 11-1 
-Based on Figure 11-1,competitive firms will receive producer surplus equal to area:
A)ACFH. 
B)EIF. 
C)AVF. 
D)AWEH.

Quizplus · Accepted Answer

Producer surplus is the difference between the market price and the minimum price that producers are willing to accept to produce a certain quantity of goods. In a competitive market, since the price is equal to marginal cost, the producer surplus can be calculated as the area above the supply curve and below the market price.

However, in a monopoly market, the producer surplus is not equal to the area above the marginal cost curve but will be equal to the area above the marginal cost curve and below the demand curve. In the given figure, the producer surplus is equal to the area ACFH. Therefore, the correct answer is A) ACFH.

The Following Figure Shows the Downward-Sloping Demand Curve [D] and Marginal