Consumer & producer surplus

Figure 6 shows the average revenue (AR), marginal revenue (MR) and marginal cost (MC) curves of a train-operating firm for peak-time and off-peak passengers. It also shows the price (P₁) that all passengers currently pay.

The train-operating firm introduces price discrimination to maximise profits. What is the effect on consumer surplus?

Explain the likely impact on consumer surplus and producer surplus as an industry moves away from a competitive market structure to one that is dominated by a few large firms.

Evaluate the view that price discrimination is damaging for consumers.

Figure 5 shows the average revenue (AR), marginal revenue (MR) and marginal cost (MC) curves for an industry which was perfectly competitive but is now a monopoly. The cost and revenue curves remain unchanged.

Which of the following areas shows the total deadweight loss of consumer and producer surplus resulting from the structure of the industry changing from perfect competition to

Figure 3 shows the demand curve (Demand) and the supply curve (Supply) for bus travel within a city. The initial market equilibrium price is P.

To reduce pollution, the city council pays bus companies to provide bus travel free of charge. As a result of this policy, consumer surplus will increase by the area

Explain how the imposition of a tax on a good or service affects both consumer surplus and producer surplus.

Assess the view that price discrimination is always damaging.