A small town is served by many competingsupermarkets, which have the same constantmarginal costs.a. Using a diagram of the market for groceries, showthe consumer surplus, producer surplus, and totalsurplus.b. Now suppose that the independent supermarketscombine into one chain. Using a new diagram,show the new consumer surplus, producer surplus,and total surplus. Relative to the competitivemarket, what is the transfer from consumers toproducers? What is the deadweight loss?
A small town is served by many competingsupermarkets, which have the same constantmarginal costs.a. Using a diagram of the market for groceries, showthe consumer surplus, producer surplus, and totalsurplus.b. Now suppose that the independent supermarketscombine into one chain. Using a new diagram,show the new consumer surplus, producer surplus,and total surplus. Relative to the competitivemarket, what is the transfer from consumers toproducers? What is the deadweight loss?
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.3P
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Question
A small town is served by many competing
supermarkets, which have the same constant
marginal costs.
a. Using a diagram of the market for groceries, show
the
surplus.
b. Now suppose that the independent supermarkets
combine into one chain. Using a new diagram,
show the new consumer surplus, producer surplus,
and total surplus. Relative to the competitive
market, what is the transfer from consumers to
producers? What is the
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