1 Which quantity does producer suplus NOT measure a the amou

1. Which quantity does producer suplus NOT measure? a. the amount sellers receive above the minimum they would accept b. the benefit to sellers of participating in a market c. the amount sellers are paid less the aount they were willing to accept d. the total value of a good to sellers Figure 7-6 2. Refer to Figure 7-6. Assune demand increases and as a result, equilibrium price increases to $22 and equilibriun quamtity increases to 110. What would be the increase in producer splus due to new producers entering the market? a. $90 b. $210 c. $360 d. $480 Figure 7 9 3. Refer to Figure 7-9. What happens at the quantity 92? a The maket is m eqnhbmum b. The value to buyers c. Consumer surplus plus producer surplus is maximized d The value to buyers is less than the cost to sellers. is greater than the cost to sellers. 4. Suppose that the equilihrium price in the market for widgets is S5. If a law increascd the minimum legal price ln widgels to $6, what wold happen lo roducer suplus? a It would necessarily increase even if the higker price resulted in a surphus ofwidgets. b. It would necessarily dacrease because the higher price would create a surplus of widgats. c. It ight ncea ox deciease. d It ould be unaffected. 5. At the equilibrium price, which buyers will purchasa the good? a those who value the good at more than the ptice b thosc who value the goad at lesa than the price c. those who have the money to buy the good d those who consider the good a necessity 6 uro e bad weathea copy \'e dur dtheOfange1ar est What Orang?un e and a{Elejince are substitut would the impact be? a increase consumer suphs in the market for orange juice but decrese producer supus in the market for apple juice b. increase consumer surplus in the market for orangs juice and increase producer surplus in the market for apple juice the market for apple juice decrease consumer aurplus in the markat for orange juice and decrease proucar surplus in the market for apple juce d. T. What will result ifmoduction is muved iwm a high-cast ducet a low-costnoduce? a lowar total garphe: b. higher total surplus d highet producer surplus but lower cansume suuplus

Solution

Q1) Answer: c

Producer surplus is the amount which is over and above the minimum acceptable price of suppliers. If the price is lower than such minimum price, there would be no producer surplus.

Q2) Answer: $90

The current equilibrium price is $16 because the intersection of demand and supply; the current equilibrium quantity is 80 units.

New equilibrium price is $22 and quantity is 110 units.

Increasing producer surplus = 0.5 × (Difference in price) × (Difference in quantity)

                                               = 0.5 × (22 – 16) × (110 – 80)

                                                = 0.5 × 6 × 30

                                                = $90

Q3) Answer: b

The quantity (Q2) is smaller than the equilibrium level of quantity (Q1), where the buyer’s price is higher than seller’s price; P2 > P3. It indicates that the value to buyer is higher than the cost to seller.

Q4) Answer: a

Producer surplus would increase here, since the gap of price between the minimum acceptance and the legal one would be the maximum.