Question

In: Economics

Five artists, Abby, Bobby, Dianne, Evaline and Carlos are willing to sell their paintings for $1,600;...

Five artists, Abby, Bobby, Dianne, Evaline and Carlos are willing to sell their paintings for $1,600; $1,300; $1,100; $900 and $800 respectively. If the market price is $2,000, the producer surplus in the market is:

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a

$10,000

b

$8,000

c

$5,700

d

$4,300

Expert Solution

Producer Surplus is the difference between the minimum price at which producers are willing to supply a good and the price they actually receive.

Producer surplus for each individual will be =

= Market price - Price at which Producer is willing to sell

For Abby - 2000 - 1600 = $400

For Bobby - 2000 - 1300 = $700

For Dianne - 2000 - 1100 = $900

For Evaline = 2000 - 900 = $ 1100

For Carlos - 2000 - 800 = $1200

Producer surplus in the market will be sum of Producer Surplus of each individual.

Therefore,

Producer surplus =

= 400 +700 + 900 + 1100 + 1200

= $4300

Rahul Sunny answered 2 years ago

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