Figure 9.1.3
-Refer to Figure 9.1.3 above. If the market is in equilibrium, total producer surplus is:
A) $2.
B) $3.
C) $200.
D) $400.
E) $600.

Question

Figure 9.1.3
-Refer to Figure 9.1.3 above. If the market is in equilibrium, total producer surplus is:
A) $2. 
B) $3. 
C) $200. 
D) $400. 
E) $600.

Quizplus · Accepted Answer

In equilibrium, total producer surplus is the area above the supply curve and below the market price.

In this case, the market price is $8 and the supply curve intersects the quantity axis at a quantity of 50.

To find total producer surplus, we need to find the area of the triangle above the supply curve and below the price.

The base of the triangle is 50 (the quantity), and the height is $6 (the difference between the price and the minimum supply cost of $2).

Therefore, total producer surplus is:

(1/2) x base x height = (1/2) x 50 x 6 = $150

But this is only for one seller, and there are 4 identical sellers in the market.

So, total producer surplus in the market is:

$150 x 4 = $600

Figure 9.1.3 -Refer to Figure 9.1.3 Above. If the Market Is in Is