Suppose the market supply curve is p = 5 + Q.If price increases from 10 to 15,the change in producer surplus is
A)12.5.
B)5.
C)50.
D)37.5.

Question

Quizplus · Accepted Answer

To find the change in producer surplus, we need to find the area between the original supply curve (p = 5 + Q) and the new supply curve (p = 15 + Q) for Q values between where the two curves intersect.

The original supply curve intersects with the demand curve at p = 10 - 5Q, which means Q = 1. The new supply curve intersects with the demand curve at p = 15 - 5Q, which means Q = 1.

Therefore, the change in producer surplus is the area between the two curves for Q values between 1 and 2. This area is equal to:

(1/2) * (10 - 5) * (2 - 1) + (1/2) * (15 - 10) * (2 - 1) = 7.5

So the change in producer surplus is $7.50.

However, this is a partial equilibrium analysis and does not take into account any externalities or general equilibrium effects that may occur from the change in price.

Suppose the Market Supply Curve Is P = 5