The schedule below represents the willingness of a typical vintner to produce wine in a year. Suppose there are 100 identical producers in the market.
TABLE 6-4

-Refer to Table 6-34. If the market price of wine is $20, what is the total producer surplus equal to?
A) $1 000 000
B) $2 000 000
C) $3 000 000
D) $4 000 000

Question

The schedule below represents the willingness of a typical vintner to produce wine in a year. Suppose there are 100 identical producers in the market.
TABLE 6-4
 
-Refer to Table 6-34. If the market price of wine is $20, what is the total producer surplus equal to?
A) $1 000 000 
B) $2 000 000 
C) $3 000 000 
D) $4 000 000

Quizplus · Accepted Answer

Producer surplus is the difference between the price producers receive for a good and the minimum price they are willing to accept. In this case, the market price of wine is $20, and the minimum price producers are willing to accept is $10 (as shown in Table 6-34). Therefore, the producer surplus is $20 - $10 = $10 per unit. Since there are 100,000 units of wine produced, the total producer surplus is $10 x 100,000 = $1,000,000.

The Schedule Below Represents the Willingness of a Typical Vintner