Economics ECON S - 1920 Lecture Notes - Lecture 1: Economic Surplus, Marginal Revenue, Financial Times

Consumer surplus plus producer surplus equals

a. Deadweight loss.

b. Economic profit.

c. Social welfare.

d. Tax revenue.

11. If resources are allocated efficiently A) consumer surplus exceeds producer surplus. B) producer surplus exceeds consumer surplus. the sum of consumer surplus and producer surplus is maximized. marginal benefit is maximized. marginal cost is minimized.

A natural monopolist faces the following demand curve: P = 334 - 4Q, its total cost is given by TC = 1500 + 14Q (marginal cost is the slope of total cost).

(a) If the government regulates the monopolist to charge a socially optimal price, what price will it charge and how many units will it sell? How much are the profit, consumer surplus, and producer surplus?

(b) If it is not a regulated monopolist, what is its profit-maximizing price and quantity (assuming single price monopolist)? How much are the profit, consumer surplus, producer surplus, and deadweight loss?

(c) If the regulated monopolist is allowed to charge a fair return price (which is $34), how much are the consumer surplus, producer surplus, and deadweight loss?