The following figure shows the demand curve, D, and the supply curve, S, for calculators in Barylia. The world price of calculators is $40.

-Refer to the figure above.What is the producer surplus after Barylia opens up to free trade?

Question

The following figure shows the demand curve, D, and the supply curve, S, for calculators in Barylia. The world price of calculators is $40.
 
-Refer to the figure above.What is the producer surplus after Barylia opens up to free trade?

Quizplus · Accepted Answer

To determine the producer surplus after Barylia opens up to free trade, we need to find the area between the world price (Pw) of $40 and the supply curve (S). This area is the producer surplus.

We can find the quantity supplied at a price of $40 by looking at the point where the supply curve intersects the y-axis. In this case, it is 50 calculators.

So, the producer surplus is: 
Producer surplus = (0.5 x (120 - 40)) x 50 
Producer surplus = $900

Therefore, the correct answer is D.

The Following Figure Shows the Demand Curve, D, and the Supply