Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equalsGroup of answer choices50.25.12.50.10.
Question
Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equalsGroup of answer choices50.25.12.50.10.
Solution
The producer surplus is the amount that producers benefit by selling at a market price that is higher than the least that they would be willing to sell for.
To find the producer surplus, we first need to find the quantity supplied at the given price.
Given the supply curve p = 5Q, we can substitute p = 10 into the equation to find Q:
10 = 5Q Q = 10/5 Q = 2
The producer surplus is then given by the area of the triangle formed by the price axis, the quantity axis, and the supply curve up to the quantity Q = 2.
The area of a triangle is given by 1/2 * base * height.
In this case, the base of the triangle is Q = 2 and the height is p = 10.
So, the producer surplus is:
Producer Surplus = 1/2 * 2 * 10 Producer Surplus = 10
So, the producer surplus at a price of 10 is 10.
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