Figure 7-16
-Refer to Figure 7-16.If the price of the good is $300,then producer surplus amounts to
A)$100.
B)$200.
C)$300.
D)$400.

Question

Figure 7-16 
-Refer to Figure 7-16.If the price of the good is $300,then producer surplus amounts to
A)$100. 
B)$200. 
C)$300. 
D)$400.

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the market price. In this case, at a price of $300, the quantity supplied is 6 units. The point where the supply curve intersects the price line marks the marginal cost, which is $100 in this case. Therefore, the area between the supply curve and the price line for 6 units is (1/2)*(6)*(300-100) = $600. Subtracting the total variable cost of producing 6 units, which is (6)*(100) = $600, we get the producer surplus of $200.

Figure 7-16 -Refer to Figure 7-16.If the Price of the Good Is