2 A small town is served by many competing supermarkets which have constant marginal cost.

a Using a diagram of the market for groceries, show the consumer surplus, producer surplus and total surplus.

b Now suppose that the independent supermarkets combine to form one chain. Using a new diagram, show the new consumer surplus, producer surplus and total surplus.

Relative to the competitive market, what is the transfer from consumers to producers?

What is the deadweight loss?