A perfectly competitive industry has 100 high-cost producers, each with a short-run supply curve given by Q_H = 16P, and 100 low-cost producers, each with a short-run supply curve given by Q_L = 24P.
The industry demand curve is given by Q^d = 100,000 - 1,000P. At market equilibrium, industry producer surplus is:

Question

Quizplus · Accepted Answer

The market supply curve is the sum of the individual supply curves: Q = 100(16P) + 100(24P) = 4,000P. Setting Q^d = Q^s gives 100,000 - 1,000P = 4,000P, solving for P gives P = $20. At P = $20, Q = 80,000. Producer surplus is the area above the supply curve and below the price, which is (1/2) * (80,000) * (20) = $800,000.

A Perfectly Competitive Industry Has 100 High-Cost Producers, Each with a Short-Run