Explain greater consumer surplus

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Reference no: EM13154908

Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer the next three questions.

Graph 1

a.The firm will earn economic profit of $1,250,000. Explain.

b. If the entry barrier is removed consumers will be better off because consumers will enjoy greater consumer surplus. Explain.

c.$625,000, the deadweight loss, is caused by the market power created by the high entry barrier. Explain.

Reference no: EM13154908

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