Question

Concrete is one input the government needs to complete a public infrastructure project. The concrete market is effectively a monopoly. Use the diagram below, showing the effects of government purchasing in the concrete market, to answer the following questions. Do is the private sector demand for concrete and D, is the augmented demand curve reflecting both private sector demand and government purchases, MC BP 0,0,0, MR Indicate the areas that represent the impact to consumer surplus (i.e. change in CS) resulting from the government's actions. Select all that apply. Select one or more: А B С D E F G H I

Answer 1

Ans.

When there is no government intervention the consumer surplus is area of the triangle A+C

Where MR =MC

But after the government action it shift to new demand curve, so new consumer surplus is the area of triangle of whole G.