According to the information provided, what will be Phil's gain in producer surplus as a result of the proposed transaction?
A)Phil will gain $30 per week
B)Phil will gain $15 per week
C)Phil will gain $45 per week
D)Phil will gain no producer surplus

Question

Quizplus · Accepted Answer

Phil's current producer surplus is $60 per week (selling 6 units at $15 each). If he raises the price to $20 per unit, the quantity demanded will decrease to 3 units, but he will still make $60 in revenue.

His new cost is $5 per unit, so his new producer surplus will be $30 per week ($15 profit per unit x 2 units sold). Therefore, Phil will gain $30 per week in producer surplus as a result of the proposed transaction.

According to the Information Provided, What Will Be Phil's Gain