In a perfectly competitive market the long-run demand and supply curves are Q = 12 - P and Q = 5P respectively.Producer surplus in this market equals
A) 0.
B) 5.
C) 10.
D) It cannot be determined without more information.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the producer surplus is equal to the difference between the market price and the minimum supply price required for the producer to supply a particular quantity of a good. In the long run, the market reaches equilibrium where the demand and supply curves intersect. Setting the two equations equal to each other and solving for P, we get: Q = 12 - P = 5P, which gives us P = 2 and Q = 10. Therefore, at the equilibrium, the producer surplus is (2-0) x 10/2 = 10. Therefore, the correct answer is C.

In a Perfectly Competitive Market the Long-Run Demand and Supply