Suppose the inverse supply curve in a market is Q = 6p2. If price ...

[TFauchery]

Suppose the inverse supply curve in a market is Q = 6p2. If price decreases from 5 to 4, the change in producer surplus is
 
  A) 150.
  B) -54.
  C) -6.
  D) -122.

Question 2

Explain why a monopoly that knows the demand curve of identical consumers can set a two-part price with the lump sum tariff equal to the total amount of potential consumer surplus.
 
  What will be an ideal response?

[mk6555]

Answer to Question 1

D

Answer to Question 2

The producer wants to set the lump sum price equal to the competitive level of consumer surplus. This maximizes the producer surplus. The consumer surplus measures the difference between the consumer's value of the good and the price paid for each unit. Thus, the consumers are willing to pay up to the total amount of consumer surplus.

[TFauchery]

Thank you

[mk6555]

Happy to help you