Question

The following table contains the costs for sellers in the market for lobster

Seller	Cost
Fran	6
Lu	13
Patty	5
Jerome	19
Denny	17

What is Fran’s producer surplus if the price of a lobster is 12? What is Jerome’s producer surplus if the price of a lobster is 12? What is the producer surplus in the market if the price of a lobster is 12? What is the change in producer surplus if the price of a lobster increases to 15?

Answer 1

Producer surplus refers to the difference between the actual price received by a seller and the minimum price the seller is willing to receive.

1) If the price of a lobster is 12, Fran’s producer surplus = 12 - 6 = 6

2) Jerome’s producer surplus if the price of a lobster is 12 = 12 - 19 = -7

3) Producer surplus in the market is the sum total of producer surplus of all sellers. When the price is 12, total producer surplus = (12 - 6) + (12 - 13) + (12- 5) + (12 - 19) + (12 - 17) = 6 - 1 + 7 - 7 - 5 = 0

4) When the price is 15, total producer surplus = (15 - 6) + (15 - 13) + (15 - 5) + (15 - 19) + (15 - 17) = 9 + 2 + 10 - 4 - 2 = 15

So, when price goes up from 12 to 15, producer surplus goes up from 0 to 15.