(Figure: The Import-Competing Industry) In the figure, what is the value of producer surplus in the absence of trade?
A) $510.
B) $150.
C) $25.
D) $15.

Question

(Figure: The Import-Competing Industry) In the figure, what is the value of producer surplus in the absence of trade? 
A) $510. 
B) $150. 
C) $25. 
D) $15.

Quizplus · Accepted Answer

The triangle representing producer surplus in the absence of trade is the area above the supply curve and below the horizontal line at the equilibrium price. This triangle has a base of 30 (quantity) and a height of 5 (difference between the equilibrium price of $20 and the minimum price producers are willing to accept of $15), so its area is (30 x 5) / 2 = $75. Since there are 6 firms in the industry, the total producer surplus in the absence of trade is 6 x $75 = $450. However, since the question asks for the value of producer surplus for a single firm, we divide $450 by 6 to get $75. Then, since the firm incurs a cost of $60, its producer surplus in the absence of trade is $15 ($75 - $60).

(Figure: the Import-Competing Industry) in the Figure, What Is the Value