1.The change in total producer surplus, the total producers surplus 2.is 140, is
ID: 1132678 • Letter: 1
Question
1.The change in total producer surplus, the total producers surplus
2.is 140, is 100, 100 to 140, 160 to 140
The following graph shows the supply curve for a group of students looking to sell used DVD players. Each student has only one used DVD player to sell. Each rectangular segment under the supply curve represents the "cost," or minimum acceptable price, for one student. Assume that anyone who has a cost equal to the market price is willing to sell his or her used DVD player 2 1 240 Eileen Clancy Becky Alex Susan Raphael QUANTITY (Used DVD players)Explanation / Answer
Answer
Producer Surplus is the benefit that producers recieves by selling at a price higher than what they are willing to sell. Producer Surplus is calculated as the area Below Price (or Market Price) and Above Supply Curve. Hence We can see from the graph that the Region A (purple shaded area) represents Total Surplus When Market Price is $100. Producer Surplus at 140 is the region below Price line 140 and above supply curve. Hence At 140 Producer Surplus = Grey Shaded Area + Purple Area i.e. Region A + Region B and as discussed above Purple area represents Producer Surplus when Market Price = 100. Hence, Grea Area represents Producer Surplus At Price(= 140) - Producer Surplus At Price(= 100).
Hence Region B (grey shaded area) represents change in Total Producer Surplus when Market Price Increases From 100 to 140.
TRUE / FALSE
1) As Raphael is willing to sell at a lower price Raphael Producer Surplus is greater than that of Susan Hence. This Statement is TRUE.
2) More the Price More will be the benefit end hence More will be the Producer Surplus. Hence Producer Surplus at (Price = 140) is greater than Producer Surplus at (Price = 100). Hence Second statement is FALSE.
3) More the price more will be the benefit and hence more will be attracted and hence more people will be willing to sell and Hence more people are willing to sell at $140 than at $100, This Statement is also FALSE.
Hence Only First Statement is True and Rest both of them are False.
We can see from the above Graph that Eileen is willing to sell at 180. In order to achieve 60 producer Surplus(or Profit), He Should sell at a price = 180 + 60 = 240.
Hence, In order for Eileen to Earn a Producer Surplus of $60, Market Price should be $240.
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