Reference Ref 1018 Figure 109 Reference Ref 1018 Figure 109

Reference: Ref 10-18

	Figure 10.9 Reference: Ref 10-18 (Figure 10.9) This firm is using block pricing, charging $35 per unit for the first 5 units, $25 per unit for units 6 and 7, and $15 per unit for all units beyond 7. What is the firm\'s producer surplus?
	$140 $165 $100 $80

Solution

Seller charges different prices for different quantities of good.

MC=10

Total revenue form first block=35(5)=175

Total revenue from second block=25(7-5)=50

Toatl revenue from third block=15(9-7)=30

Total cost=(MC)(Q)=10(9)=90

Producer surplus=Total revenue from all blocks-Total cost

=(175+50+30)-10(9)

=165 $