The following figure shows the demand and supply curves for bottled water.

-Refer to the figure above.If a price control is imposed at $8,what is the new producer surplus in the market?
A) $20
B) $40
C) $60
D) $80

Question

The following figure shows the demand and supply curves for bottled water.
 
-Refer to the figure above.If a price control is imposed at $8,what is the new producer surplus in the market?
A) $20 
B) $40 
C) $60 
D) $80

Quizplus · Accepted Answer

At a price of $8, the quantity supplied is 4 and the quantity demanded is 8. The producer surplus is the area below the supply curve and above the price line, which is a triangle with a base of 4 and a height of 2. The area of a triangle is (1/2) * base * height, so the producer surplus is (1/2) * 4 * 2 = $4.

The Following Figure Shows the Demand and Supply Curves for Bottled