Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A $6, Firm B $7, Firm C $10, and Firm D $12. If the market price is $11, then the total producer surplus is
A) $10.
B) $11.
C) $33.
D) $9.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the market price and the minimum price each firm is willing to accept. Firm A has a surplus of $5 ($11 - $6), Firm B has a surplus of $4 ($11 - $7), Firm C has a surplus of $1 ($11 - $10), and Firm D does not sell because the market price is below its minimum price. Total producer surplus is $5 + $4 + $1 = $10.

Suppose There Are Four Firms That Are Each Willing to Sell