The Folowng The following graph shows the supply curve for a group of students l

Question

The Folowng The following graph shows the supply curve for a group of students looking to sell used smartphones. Each student has only one used smartphone 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 just equal to the market price is wiling to sell his or her used smartphone. Rajv Maria QUANTITY (Used smartphones) Region A (the purple shaded area) represents the total producer surplus when the market price is $125, while Region B (the grey shaded area) represents when the market price In the folowing table, indicate which statements are true or faise based on the information provided on the previous graph. Assuming each student receives positive surplus, Rape will always receive more producer surplus than Simone. ) Producer surplus is larger when the price is $140 than when it is $100 up

Explanation / Answer

(1) Producer surplus (PS) = Market price - Minimum acceptable price

Region A represents the total producer surplus when market price is $100, while region B represents the Increase in producer surplus when market price Increases to $140.

(2)

(a) Rajiv will always receive more producer surplus than Simone - True [Since Rajiv's minimum acceptable price is lower than that of Simone]

(b) Producer surplus is larger when price is $140 than when it is $100 - True [Since PS = Market price - Minimum acceptable price, the higher the market price, the larger the PS]

(3)

For Ana to receive $60 producer surplus, market price needs to be $180 [Reason: PS = Market price - Minimum acceptable price, therefore Market price = PS + Minimum acceptable price = $60 + $180 (Ana's minimum acceptable price)].

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