The diagram below shows supply, demand, and quantity exchanged of Monday matinee movie tickets. Assume it is a perfectly competitive market. FIGURE 12- 4
-Refer to Figure 12- 4. What is the value of the producer surplus generated in this market at the free- market equilibrium?
A) $10
B) $250
C) $0
D) $5
E) $125

Question

The diagram below shows supply, demand, and quantity exchanged of Monday matinee movie tickets. Assume it is a perfectly competitive market.  FIGURE 12- 4
-Refer to Figure 12- 4. What is the value of the producer surplus generated in this market at the free- market equilibrium?
A) $10 
B) $250 
C) $0 
D) $5 
E) $125

Quizplus · Accepted Answer

Producer surplus is the difference between the price received by producers and the marginal cost of production. At the free-market equilibrium, the price is $15 and the marginal cost is $10, giving a producer surplus of $5 per ticket. There are 25 tickets sold, so the total producer surplus in the market is $5 x 25 = $125. Therefore, the best choice is E.

The Diagram Below Shows Supply, Demand, and Quantity Exchanged of Monday