By how much is consumer surplus higher

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Reference no: EM13191022

A (mini-) refrigerator monopolist, because of strong scale economies, would charge a price of $120 and sell forty-five refrigerators in Iceland. Its average cost would be $60. On the other hand, the Iceland Planning Commission has determined that five refrigerator suppliers would be sufficiently competitive to bring price into equality with average cost. The five-firm equilibrium would yield a price of $100 and a total output of fifty refrigerators.

a. Consumer surplus under the five-firm industry organization would be larger than under monopoly. If the demand curve is linear, by how much is consumer surplus higher?

Reference no: EM13191022

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