Chapter 8, Problem 6P

To determine

Concept Introduction

Monopoly: This refers to the condition in a market where there is a single person or company who sells a particular good or service and there is no competitor. In a monopoly, the supplier is free to fix any price since the consumers have no alternative available.

Consumer Surplus: This is the surplus occurring due to a difference in the amount that a consumer is willing to pay for a good or service and the amount that is actually paid by the consumer.

Producer Surplus: This is the surplus occurring due to a difference in the amount at which a good or service is sold by the producer and the amount at which the producer is willing to sell the good or service.

Perfect Competition: This is a situation that prevails in the market where there are numerous buyers and sellers. When a market is in perfect competition, the price of a product cannot be influenced by a single buyer or seller.

Deadweight Loss: This is a situation when there is a loss suffered due to an inefficiency in the market when the equilibrium point is not achieved.