Scenario: Suppose a competitive market has ten buyers and ten sellers. The product exchanged in this market is beach hats, which are indivisible. The following table shows the reservation values for both buyers and sellers.

-Refer to the scenario above.Suppose the equilibrium price in this market is $10.What is the amount of producer surplus in this market?
A) $6
B) $10
C) $15
D) $29

Question

Scenario: Suppose a competitive market has ten buyers and ten sellers. The product exchanged in this market is beach hats, which are indivisible. The following table shows the reservation values for both buyers and sellers.
 
-Refer to the scenario above.Suppose the equilibrium price in this market is $10.What is the amount of producer surplus in this market?
A) $6 
B) $10 
C) $15 
D) $29

Quizplus · Accepted Answer

Producer surplus is the difference between the price at which producers are willing to sell a good and the market price. In this case, the minimum price at which sellers are willing to sell the hats is $14, but the market price is only $10. Therefore, the producer surplus per hat is $4. Multiplied by the quantity of hats sold (10), the total producer surplus in the market is $40, which is option D.

Scenario: Suppose a Competitive Market Has Ten Buyers and Ten