-In the figure above, when the price of a CD is $8, total producer surplus from all the CDs will be
A) $10 million.
B) greater than at $10 per CD.
C) $20 million.
D) zero.

Question

-In the figure above, when the price of a CD is $8, total producer surplus from all the CDs will be
A) $10 million. 
B) greater than at $10 per CD. 
C) $20 million. 
D) zero.

Quizplus · Accepted Answer

At a price of $8, the quantity supplied is 10 million units and the quantity demanded is 5 million units. Producer surplus is the area above the supply curve and below the price line, which is a triangle with a base of 5 million units and a height of $2. Therefore, producer surplus is (1/2) * 5 million * $2 = $5 million. Since there are 2 million CDs sold at this price, total producer surplus is 2 * $5 million = $10 million.

-In the Figure Above, When the Price of a CD