Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is . If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Question

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is  . If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Quizplus · Accepted Answer

To find the producer surplus, we need to first find the equilibrium price and quantity where the supply curve intersects with the demand curve. However, this information is not given in the problem.

But we do know that if 90 units are produced and sold, then producer surplus is $1,350. This means that the total revenue received by the producers from selling 90 units is $1,350.

Using the supply curve equation, we can find the marginal cost (MC) of producing the 90th unit, which is the same as the price since the producer is willing to sell at that price:

P = 11eb1463_ae6b_cc26_8021_cf23b32b48ca_TB1273_11 
MC = P at QS = 90

Let's assume we can approximate this equation using a linear equation of the form P = a + b*QS. We can then use the information given to solve for a and b:

P = a + b*QS
$1,350 = a + b*90

We don't have enough information to solve for both a and b, but we can make some assumptions to estimate a range of values. Let's assume that the supply curve is upward sloping (which is the case for most goods) and that it passes through the origin (i.e., no fixed costs). This would mean that a = 0.

Then we can solve for b:

$1,350 = 0 + b*90
b = $15

This gives us our linear supply equation:

P = $15 * QS

Now we can find the price at QS = 90:

P = $15 * 90 = $1,350

This confirms that the producer's willingness to sell the 90th unit at $1,350 matches the actual revenue received for selling it.

Given this finding, we can infer that the producer surplus at this quantity is zero because the producer is just breaking even (i.e., earning a normal profit). If the producer were actually earning a surplus, then the revenue received for selling the 90th unit would be greater than $1,350.

Therefore, the statement "If 90 units of the good are produced and sold, then producer surplus amounts to $1,350" is false.

Let P Represent Price; Let QS Represent Quantity Supplied; and Assume