Which area represents the producer surplus? O Producer surplus can be defined as the difference between the price the producer chargesto the consumers and the producer's marginal cost at its determined output level. Since weknow that the monopolist below will determine its quantity level when MR=MC, its outputlevel would be 500. Then, which area will represent the producer surplus?Price $86.5A4BPM = $3.50DMCMRDClaritin2004006008001.0001,200Quantity2.

Answered: producer surplus

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which area represents the producer surplus?

O Producer surplus can be defined as the difference between the price the producer charges
to the consumers and the producer's marginal cost at its determined output level. Since we
know that the monopolist below will determine its quantity level when MR=MC, its output
level would be 500. Then, which area will represent the producer surplus?
Price $8
6.
5
A
4
B
PM = $3.50
D
MC
MR
DClaritin
200
400
600
800
1.000
1,200
Quantity
2.

Expert Solution

Step 1

The producer surplus depicts the variation between price received by producer and his willingness to accept. The consumer surplus depicts the variation between price paid by consumer and his willingness to pay. The total surplus includes both the producer and consumer surplus.

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