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Author Question: The above figure shows the demand, marginal revenue, and cost curves for a natural monopoly. a. ... (Read 76 times)

Mimi

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on: Jun 29, 2018
The above figure shows the demand, marginal revenue, and cost curves for a natural monopoly.
 
  a. Which price and quantity is set if the capture theory is correct?
  b. If production is at the price and quantity specified in part (a), what area represents the economic profit?
  c. If production is at the price and quantity specified in part (a), what area represents the deadweight loss?
  d. If production is at the price and quantity specified in part (a), what area represents the consumer surplus?

Question 2

The sum of the marginal private benefit and the marginal external benefit derived from eco-tourism in British Columbia is called the
 
  A) total private benefit.
  B) net gain.
  C) total external benefit.
  D) marginal social benefit.
  E) total Coase benefit.
Foundations of Microeconomics ¦ Bade, Parkin ¦ 8th Edition
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Joy Chen

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Reply #1 on: Jun 29, 2018
Answer to Question 1

a. The profit-maximizing price and quantity are P2 and Q1.
b. The economic profit equals the area of the rectangle P2abP3.
c. The deadweight loss is the area of the triangle acd.
d. The consumer surplus is the area of the triangle P1aP2.

Answer to Question 2

D


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