5 Producers surplus and price changes The following graph sh

5. Producer\'s surplus and price changes The following graph shows the supply curve for a group of students looking to sell used graphing calculators. Each student has only one used calculator to sell. Each rectangular segment under the supply curve represents the \"cost,\" or minimum acceptable price, for one student. Assume that anyone who has a cost equal to the market price is willing to sell his or her used calculator. 21 QUANTITY IUsed calears Region A (the purple shaded area) represents the total producer\'s surplus when the market price is , while Region B (the grey shaded area) represents when the market price

Solution

5. Region A (the purple shaded area) represents the total producer\'s surplus when the market price is $210. Because producer surplus is the difference between seller\'s cost and the price seller receives. Area above the supply curve and below the market price. Therefore, market price is equal to $210, While region B (the grey shaded area ) represents the change in total producer surplus when the market price changes from $210 to $245. We can see this from the given graph in the question.

There are fewer people selling used calculators when the market price is $245 than when it is $210. FALSE, Because when price is $210 then four students Nick, Rosa, Tim and Alysaa sell their used calculators. And when price is $245 then, also only four students are able to sell their used calculators i.e Nick, rosa, tim and alyssa . Brian will not be able to sell his used calculator because his cost is more than $245.

Assuming each student receives a positive surplus, Rosa will always receive less producer\'s surplus than tim. FALSE,Because when price is $175 then, Rosa will receive more producer surplus and Tim will not receive any producer surplus.

Producer\'s surplus is larger when the price is $245 versus when it is $210. TRUE, because when there is also the addition of grey area.

In order for Crystal to earn a producer\'s surplus of exactly $35 from selling a used calculator, the market price needs to be $105 Because when price =$105 then, producer surplus = area of the rectangle = $(105-70)(1) = $35 .