When will producer surplus, as shown on a graph of demand and marginal cost, be exactly...

When will producer surplus, as shown on a graph of demand and marginal cost, be exactly equal to the profit earned by a monopolist firm (or any firm that faces its own demand curve)?

a. When fixed costs are equal to zero

b. When the marginal cost is constant

c. When the average total cost is u-shaped

d. When fixed costs and variable costs are equal

Solutions

Expert Solution

a. When fixed costs are equal to zero.

(In this case, Marginal Cost = Average Cost so producer surplus will equal profits.)

Rahul Sunny answered 2 years ago

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