Table 7-8
The only four producers in a market have the following costs:

-Refer to Table 7-8.If the sellers bid against each other for the right to sell the good to a consumer,then the producer surplus will be
A) $0 or slightly more.
B) $50 or slightly less.
C) $150 or slightly less.
D) $200 or slightly more.

Question

Table 7-8
The only four producers in a market have the following costs:
 
-Refer to Table 7-8.If the sellers bid against each other for the right to sell the good to a consumer,then the producer surplus will be
A) $0 or slightly more. 
B) $50 or slightly less. 
C) $150 or slightly less. 
D) $200 or slightly more.

Quizplus · Accepted Answer

If the sellers bid against each other for the right to sell the good to a consumer, the price will eventually be driven down to the level of the producer with the lowest cost, which in this case is $50. Therefore, the producer surplus for the four producers will be the sum of the differences between the market price ($50) and their individual costs, which are $30, $40, $50, and $60. 
Producer surplus = (50-30) + (50-40) + (50-50) + (50-60)
Producer surplus = $20 + $10 + $0 - $10 
Producer surplus = $20 
Since the question asks for the surplus in relation to the market price, the answer is B, $50 or slightly less.

Table 7-8 The Only Four Producers in a Market Have the Following