Figure 9-1

Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Under autarky, the producer surplus is

Question

Figure 9-1
  
Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Under autarky, the producer surplus is

Quizplus · Accepted Answer

Under autarky, producer surplus is the area between the supply curve and the price line up to the quantity supplied. In this case, producer surplus is the area of the triangle with base 15 (quantity supplied) and height 7 (price). Therefore, producer surplus is (1/2)*15*7=$52.5. However, there is also an opportunity cost of producing leather footwear, which is the value of the resources used in production that could have been used in other sectors. This opportunity cost is represented by the area of the rectangle with base 15 and height 6 (the supply curve intercept). Therefore, the net producer surplus under autarky is $105 ($52.5 from the triangle + $52.5 from the rectangle).

Figure 9-1 Figure 9-1 Shows the U.S. Demand and Supply for Leather