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Homework answers / question archive / If a firm has market power and marginal cost is constant relative to perfect competition: consumer surplus is lower, producer surplus is lower, and total surplus is lower
If a firm has market power and marginal cost is constant relative to perfect competition:
consumer surplus is lower, producer surplus is lower, and total surplus is lower.
consumer surplus is lower, producer surplus is higher, and total surplus is lower.
consumer surplus is lower, producer surplus is higher, and total surplus is higher.
consumer surplus is higher, producer surplus is lower, and total surplus is lower.
If a firm has market power and marginal cost is constant relative to perfect competition
consumer surplus is lower, producer surplus is higher, and total surplus is lower.
Consumer surplus is encountered by consumers when they pay for a price which is lower than what they are willing and able to pay. When a firm has a market power, it may charge consumer higher price or it may overprice their commodities leading to higher producer surplus and reduced consumer surplus which eventually leads to lower total surplus.
