Question

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.

Answer 1

A) $10

Step-by-step explanation:

Producer surplus is the difference between the least amount sellers are willing to sell their product and the price of the product.

Producer surplus for firm A = $11 -$6 = $5

Producer surplus for firm B = $11 - $7 = $4

Producer surplus for firm C = $11 - $10 = $1

Firm D does not make a producer surplus because the producers minimum price is greater than the market price

Total producer surplus = $5 + $4 + $1 = $10

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