Question

What is producer surplus? Why can it be measured as the area above a firm's marginal...

What is producer surplus? Why can it be measured as the area above a firm's marginal cost curve and below the price line? How does it relate to a firm's profits?

Homework Answers

Answer #1

Producer surplus can be defined as the difference between the price of the goods and the cost of the goods to the sellers.

Since the cost of the goods is shown in the graph by the supply curve and the price is shown by the equilibrium price and it is determined by the intersection of supply and demand curve.

The firm profit will be = total revenue - total cost.

Since the total revenue will be determined by the product of the price and quantity sold and the total cost will be the total cost of supplying the equilibrium quantity. Hence the producer surplus will be equal to the firm profit. In the diagram, it has been shown by the shaded triangle.

Hence the producer surplus relates to the firm profit.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is producer surplus and how is it measured? What is the relationship between the cost...
What is producer surplus and how is it measured? What is the relationship between the cost to sellers and the supply curve? All else being equal, what happens to producer surplus when the price of a good rises?
Which of the following statements are true for the consumer and producer surplus? Select one or...
Which of the following statements are true for the consumer and producer surplus? Select one or more: a. When firms are able to sell a good at a price higher than the marginal cost of production, they are getting producer surplus. b. When consumers are able to buy a product at a price lower than its marginal value of consumption, it is called consumer surplus. c. Consumer surplus is the difference between the price of a product and consumers' valuation...
A mutually beneficial voluntary trade will result in A. consumer surplus B. producer surplus C. gains...
A mutually beneficial voluntary trade will result in A. consumer surplus B. producer surplus C. gains from trade D. all of the above 2. Consumer surplus is A. the difference between the demand curve and the price of the good B. the difference between the supply curve and the price of the good C. the difference between the demand curve and the supply curve D. the difference between the price consumers pay and the cost of making the good E....
explain why a single consumer can get consumer surplus. explain why a single producer can get...
explain why a single consumer can get consumer surplus. explain why a single producer can get producer surplua
Is the contribution total surplus always positive? why or why not? what is total surplus, consumer...
Is the contribution total surplus always positive? why or why not? what is total surplus, consumer surplus, producer surplus at equilibrium If coffee was fixed at $3 what is total surplus and is there and deadweight loss Is there another way to consume the same number of cups of coffee and increase total surplus? why cups of coffee marginal benefit marginal cost total surplus consumer surplus producer surplus 1 4.00 1.50 8 2.50 5.50 2 3.00 1.75 6 1.25 4.75...
What is the motivation for calculating consumer surplus, producer surplus, and total surplus? Assume the equilibrium...
What is the motivation for calculating consumer surplus, producer surplus, and total surplus? Assume the equilibrium quantity in a competitive market is 16 and the equilibrium price is 8. Also assume the highest willingness to pay is 14 and the lowest cost is 3. Calculate the consumer surplus, producer surplus, and total surplus for this market.
What is the consumer surplus (CS) and producer surplus (PS) in a competitive market with a...
What is the consumer surplus (CS) and producer surplus (PS) in a competitive market with a market demand curve defined by p = 5 - q and a market supply curve defined by p = (1/4)q? (Recall that the formula for calculating the area of a triangle is (1/2) * b * h, where b is the length of the triangle's base and h is the triangle's height.) a.CS = 16 & PS = 4 b.CS = 2 & PS...
a. Show on a demand supply graph how consumer surplus and producer surplus is defined. b....
a. Show on a demand supply graph how consumer surplus and producer surplus is defined. b. In general to evaluate welfare effects we need to consider the welfare of groups of individuals. What problem does consumer surplus pose in this regard? c. There are two firms in an economy facing a upward sloping supply curve in a perfectly competitive setting. Show graphically how you would nd the total producer surplus in the economy.
The firm has the following cost function: C(y)=3y^2+3/4y What is the firm's producer surplus at y=25?...
The firm has the following cost function: C(y)=3y^2+3/4y What is the firm's producer surplus at y=25? Round answers to 4 decimal places
Demand for Dok P=60-0.5Q supply P=12+0,5Q 1.what is the equilibrium price, quantity, consumer surplus and producer...
Demand for Dok P=60-0.5Q supply P=12+0,5Q 1.what is the equilibrium price, quantity, consumer surplus and producer surplus. 2.suppose the demand curve increases by 12 unit at given price. Hold everything constant, what is new equilibrium price, quantity, consumer surplus and producer surplus. 3.use the original demand and supply curve in part one. assume economy can trade with world for 12 unit. What is the market price for local consumers if the world price is 24. What is price local producer...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT