Suppose the market supply curve is p = 5Q.If price increases from 10 to 15,the change in producer surplus is
A)25.
B)5.
C)12.5.
D)20.

Question

Quizplus · Accepted Answer

To calculate the change in producer surplus, we need to find the area between the new equilibrium price (15) and the old equilibrium price (10), and below the supply curve.

Old equilibrium:
p = 10
5Q = 10
Q = 2

New equilibrium:
p = 15
5Q = 15
Q = 3

The area between the two equilibria is a trapezoid with base 1 (the difference in quantity) and heights of 10 (the old price) and 15 (the new price).

[(10+15)/2]*1 = 12.5

Therefore, the change in producer surplus is $12.50 [(12.5-0) = 12.5]. Thus, the correct answer is C.

Suppose the Market Supply Curve Is P = 5Q