Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Question

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is  If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Quizplus · Accepted Answer

To calculate producer surplus, we need to find the area below the market price and above the supply curve. When 90 units are produced and sold, we can find the market price by plugging in 90 for QS in the supply equation:

P = 2 + 0.1(90) = 11

So the market price is $11 per unit. To find the quantity supplied at this price, we can plug in 11 for P and solve for QS:

11 = 2 + 0.1QS
QS = 90

So at a price of $11, 90 units are supplied. To find the area below the market price and above the supply curve, we can use the formula for the area of a triangle:

Producer Surplus = (1/2)(Price - Minimum Supply Price)(Quantity Supplied)
Producer Surplus = (1/2)($11 - $2)(90)
Producer Surplus = $585

So the given information implies that producer surplus is $585, not $1,350. Therefore, the answer is false and the correct answer is B.

Let P Represent Price; Let QS Represent Quantity Supplied; and Assume