MJM Products,Inc.,designs and sells flannel jackets.The company is willing to sell a men's flannel jacket for as little as $45.Its main competitor is RL Outriggers,which is willing to sell the same men's flannel jacket for as little as $40.The current market price of that type of jacket is $57.What is the total producer surplus for the two firms?
A) $95
B) $12
C) $17
D) $29
E) $5

Question

Quizplus · Accepted Answer

The producer surplus for MJM Products, Inc., can be calculated as:
Producer Surplus = (Market Price - Minimum Price to Sell) x Quantity Sold
= ($57 - $45) x Quantity Sold
= $12 x Quantity Sold

Similarly, the producer surplus for RL Outriggers can be calculated as:
Producer Surplus = (Market Price - Minimum Price to Sell) x Quantity Sold
= ($57 - $40) x Quantity Sold
= $17 x Quantity Sold

The total producer surplus for the two firms is the sum of their individual producer surpluses:
Total Producer Surplus = ($12 + $17) x Quantity Sold
= $29 x Quantity Sold

Therefore, the total producer surplus for the two firms is $29.