Figure: Producer Surplus Il Price P2 0 Q1 93 Quantity 6. (Figure: Producer Surpl

Question

Figure: Producer Surplus Il Price P2 0 Q1 93 Quantity 6. (Figure: Producer Surplus II) Look at the figure Producer Surplus II. At a price of P2, producer surplus equals the area A) LMK. B) PiKOo C) P2M0 D) P2PiKM 7. We can measure total producer surplus for good X as A) the sum of the individual producer surpluses for all buyers of X. B) the area below the supply curve for X and above the price of X. C) the area bounded by the supply curve for X and the two axes D) the area between the demand curve for X and the supply curve for X. 8. Moutain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm S100 for the first raft trip per day. $120 for the second, S140 for the third, and $160 for the fourth. If the market price for a raft trip is S150, Mountain River Adventures will offer trips per day and will have producer surplus equal to A) three: $90 B) three: $10 C) two $220 D) four; $80 9. Along a given upward-sloping supply curve, a decrease in price will cause producer surplus to A) increase. B) decrease C) stay the same. D) We cannot determine what producer surplus will do without information about the demand curve

Explanation / Answer

6. Option C
7. Option A
8. Option A. As mountain river would offer till costs equals price, hence it would offer three trips and sum of the producer surplus equals (50+30+10) = 90
9. Option B. With the decrease in price the producer surplus decreases

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