Suppose the market supply curve is p = 5 + Q.At a price of 10,producer surplus equals
A) 50.
B) 25.
C) 12.50.
D) 10.

Question

Quizplus · Accepted Answer

To calculate the producer surplus, we need to find the area below the price line and above the supply curve. At a price of 10, the quantity supplied by the market can be found by setting p = 10 in the supply curve:

10 = 5 + Q

Q = 5

Therefore, at a price of 10, the quantity supplied by the market is 5 units.

To find the producer surplus, we need to find the area below the price line (10) and above the supply curve (which is a straight line with intercept 5 and slope 1):

Producer surplus = (10 - 5) * 5 / 2

Producer surplus = 12.50

Therefore, the correct answer is (C).

Suppose the Market Supply Curve Is P = 5