Econ The following graph shows the supply curve for a group

Econ!

The following graph shows the supply curve for a group of students looking to sel used economlcs textbool Each student has on one used ks. textbook 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 just equal to the market price Is willing to sell his or her used textbook. Rosa A O a Jake QUANTITY (Used textbooks) Region A (the purple shaded area represents the total producer surplus when the market price is 3 while Region B (the grey shaded area) when the market price represents Complete the following table by Indicating which statements are true or false based on the Information provided on the previous graph. Statement True False There are fewer people selling used textbooks when the market price ls $175 than when It is $125. Producer surplus ls smaller when the price ls $175 versus when ls $125. Assuming each student recelves a posltlve surplus, Dmltrl will always receive more producer surplus than Frances In order for NIck to earn a producer surplus of exactly $50 from selling a used textbook, the market price needs to be s

Solution

Shaded area that lies just above the supply curve but below the market price represents area of producer surplus.

Region A (the purple shaded area) represents area of producer surplus.

As we can see that region A lies above the supply curve but below the price of $125 per used text book (horizontal line at $125)

Since, area of producer surplus lies below the market price, with respect to region A, market price is $125 per used textbook.

Thus, Region A (the purple shaded area) represents the total producer surplus when the market price is $125 per used text book.

Region B (the grey shaded area) represents area of producer surplus.

As we can see that region B lies above the supply curve but below the price of $175 per used text book (horizontal line at $175)

Since, area of producer surplus lies below the market price, with respect to region B, market price is $175 per used textbook.

Thus, Region B (the grey shaded area) represents the total producer surplus when the market price is $175 per used text book.

When market price is $125 per used textbook then this price is either equal to or greater than the cost or minimum acceptable price of Dmitri, Frances, Jake, and Latasha. So, these four will sell their textbook when price is $125 per used textbook.

When market price is $175 per used textbook then this price is either equal to or greater than the cost or minimum acceptable price of Dmitri, Frances, Jake, and Latasha. So, these four will sell their textbook when price is $175 per used textbook.

As we can see that number of sellers is same when price is $125 or $175.

Hence, the given statement is false.

Producer surplus and market price has direct relation. Higher the market price, larger is the producer surplus.

So, producer surplus at price of $175 will be larger than the producer surplus at price of $125.

Hence, the given statement is false.

Producer surplus for a seller is the difference between market price and minimum acceptable price of seller multiplied by quantity sold.

Minimum acceptable price of Dmitri is $25 per textbook.

Minimum acceptable price of Frances is $75 per textbook.

Both have one textbook to sell.

So, given any market price, difference between the market price and minimum acceptable price will be greater for Dmitri owing to his lower minimum acceptable price in comparison to Frances.

Therefore, Dmitri will always receive more producer surplus than Frances.

Hence, the given statement is true.

Minimum acceptable price of Nick = $200

Producer surplus required by Nick = $50

Quantity sold by Nick = 1

Producer surplus = (Market price - Minimum acceptable price) * Quantity sold

$50 = (MP - $200) * 1

MP = $200 + $50 = $250

Thus, the market price needs to be $250.