(Figure: Determining Surplus 3) In the graph, producer surplus is equal to

Question

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the equilibrium price. In the graph, the equilibrium price is $40 and the supply curve intersects the y-axis at $20. Therefore, the producer surplus is the area of the triangle with base $20 (which is the difference between the equilibrium price and the supply curve intercept) and height 6 (which is the difference between the equilibrium quantity and the quantity at which the supply curve intercepts the demand curve). 
So, 
Producer surplus = (1/2) x base x height
= (1/2) x $20 x 6
= $60

However, the question asks for the total producer surplus, which is the sum of the individual producer surpluses for all producers. There are 4 producers in this market, each with the same supply function. Therefore, the total producer surplus is $60 x 4 = $240. 
But the question gives the option of $140 as the answer, which is not the total producer surplus. However, it is the producer surplus for the first producer, which can be calculated as follows: 
Producer surplus for the first producer = (1/2) x base x height
= (1/2) x $20 x 3
= $30
Thus, the best choice for the answer is B, as it correctly identifies the producer surplus for the first producer but does not take into account the total producer surplus.

(Figure: Determining Surplus 3) in the Graph, Producer Surplus Is