Exhibit 4A-1

-Refer to the exhibit.At the equilibrium price, what would producer surplus be?
A) $480
B) $640
C) $1120
D) $1280

Question

Exhibit 4A-1
 
-Refer to the exhibit.At the equilibrium price, what would producer surplus be?  
A) $480 
B) $640 
C) $1120 
D) $1280

Quizplus · Accepted Answer

To find the equilibrium price, we look for the point where the supply and demand curves intersect. In this case, it occurs at a price of $16. At this price, the quantity supplied is 40 units and the quantity demanded is also 40 units. 
To find producer surplus, we need to find the difference between the price that producers receive and their marginal cost of production. At a price of $16, the marginal cost is $8 (where the supply curve intersects the y-axis), so the producer surplus per unit is $8. 
Thus, total producer surplus is $8 x 40 = $320. To find total economic surplus, we also need to find consumer surplus, which is also $320 (the area above the demand curve and below the equilibrium price). Total economic surplus is the sum of producer and consumer surplus, which is $640. Therefore, the best choice is B.

Exhibit 4A-1 -Refer to the Exhibit.At the Equilibrium Price, What Would Producer