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 would be
A)$2,500.
B)$900.
C)$800.
D)$1,600.

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 would be
A)$2,500. 
B)$900. 
C)$800. 
D)$1,600.

Quizplus · Accepted Answer

Producer surplus is the difference between the price at which producers are willing to sell a good and the actual price they receive. In this case, the increase in equilibrium price from $50 to $70 means that producers are now receiving a higher price for the same quantity of output. The increase in producer surplus can be calculated as the area of the triangle formed by the new equilibrium price ($70), the original supply curve, and the new quantity demanded. Using the formula for the area of a triangle (0.5 x base x height), we can calculate the increase in producer surplus as:
0.5 x ($70 - $50) x 40 = $800
Therefore, the correct answer is D.

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