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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

A small town is served by many competing supermarkets, which have the same constant marginal cost.

a. Using a diagram of the market for groceries, show the consumer surplus, producer surplus, and total 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 deadweight loss?

Subpart (a):

To determine
The consumer surplus, producer surplus, and total surplus.

Explanation

Figure 1 shows the demand curve of groceries with constant marginal cost.

Subpart (b):

To determine
The consumer surplus, producer surplus, and total surplus.

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