Economics (AS & A Level) · Feb / March 2021 · Paper 32 · Question 9

The diagram shows a competitive industry facing constant marginal and average costs. In equilibrium its output is OQ_C and its price is OP_C. A series of horizontal mergers generate economies of scale and create a monopoly in the industry. The new equilibrium output is OQ_M and price is OP_M. Which area represents the producer surplus after these mergers?

1. AW
2. BW + X
3. CW + X – Z
4. DX

As printed in the paper