The following table represents the costs of five possible sellers.
Table 7-4

-Refer to Table 7-4.If the market price is $1,000,the producer surplus in the market is
A)$700.
B)$750.
C)$2,250.
D)$3,700.

Question

The following table represents the costs of five possible sellers.
Table 7-4
 
-Refer to Table 7-4.If the market price is $1,000,the producer surplus in the market is
A)$700. 
B)$750. 
C)$2,250. 
D)$3,700.

Quizplus · Accepted Answer

To calculate the producer surplus, we need to first find the equilibrium quantity in the market by adding up the quantities supplied by each seller until we reach a quantity of 1,000 at a price of $1,000. This gives us an equilibrium quantity of 3,000. 
Next, we need to find the cost of the seller who supplies the last unit of output (in this case, Seller 5) since they determine the market price. We see from the table that Seller 5's cost is $250 per unit, so their producer surplus is ($1000 - $250) x 1,000 = $750. Therefore, the total producer surplus in the market is also $750. 
The other options are not correct as they either overestimate or underestimate the producer surplus.

The Following Table Represents the Costs of Five Possible Sellers