Price Domestic supply World pnce 16 14 12 10 Domestic demand

Price Domestic supply World pnce 16 14 12 10 Domestic demand 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 Quanti Refer to Figure 9-2. With free trade, producer surplus is a. $845. O b, $1,620. c. $1,690. d. $3,240.

Solution

Correct Answer:

B.

Here, the producer surplus is created on the basis of domestic supply catered and the export being made by the sellers.

Producer surplus = =(1/2)*(15-2)*130 + 5*80 + (1/2)*5*(130-80) +0.5* 5*100  = $1620