Figure 7-5. On the graph below, Q represents the quantity of the good and P represents the good's price.

-Refer to Figure 7-5.If the price of the good is $8.50,then producer surplus is
A)$6.50.
B)$8.00.
C)$9.50.
D)$11.00.

Question

Figure 7-5. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-5.If the price of the good is $8.50,then producer surplus is
A)$6.50. 
B)$8.00. 
C)$9.50. 
D)$11.00.

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the actual price. In this case, if the price of the good is $8.50, the quantity supplied is Q=12. At this quantity, the supply curve intersects the price line at point B. The producer surplus is the area of the triangle PBC, which can be calculated as 0.5*base*height = 0.5*(8.50-4.00)*12 = $26. Therefore, the correct answer is B) $8.00, which is the closest option to the calculated value of producer surplus.