Figure 7-22
-Refer to Figure 7-22.Assume demand increases,which causes the equilibrium price to increase from $50 to $70.The increase in producer surplus to producers already in the market would be
A)$1,600.
B)$600.
C)$800.
D)$1,200.

Question

Figure 7-22 
-Refer to Figure 7-22.Assume demand increases,which causes the equilibrium price to increase from $50 to $70.The increase in producer surplus to producers already in the market would be
A)$1,600. 
B)$600. 
C)$800. 
D)$1,200.

Quizplus · Accepted Answer

The increase in producer surplus for producers already in the market would be the area between the new equilibrium price ($70) and the old supply curve ($50) for the quantity that they were already producing. This area is a triangle with base 20 (the increase in price) and height 20 (the quantity produced at the old equilibrium). Therefore, the increase in producer surplus is (1/2)*20*20=$400. Multiplying this by the number of producers already in the market (3), we get a total increase in producer surplus of $1,200.

Figure 7-22 -Refer to Figure 7-22.Assume Demand Increases,which Causes the Equilibrium Price