Figure 4-4 Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4-4. What is the value of producer surplus at a price of $18?

Question

Figure 4-4  Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4-4. What is the value of producer surplus at a price of $18?

Quizplus · Accepted Answer

Producer surplus is the difference between the price producers receive for a good and the minimum price they are willing to accept. At a price of $18, producers are willing to supply 12 units of the good. The total revenue they receive is $18 x 12 = $216. The minimum price they are willing to accept is $15, so their producer surplus is $216 - (15 x 12) = $24.

Figure 4-4 Figure 4-4 Shows the Market for Tiger