Question

6. Producer surplus and price changes 

The following graph shows the supply curve for a group of students looking to sell used economics textbooks. Each student has only one used 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. 

Region A (the purple shaded area) represents the total producer surplus when the market price is $_______ , while Region B (the grey shaded area)  represents _______  when the market price _______ . 

In the following table, indicate which statements are true or false based on the information provided on the previous graph.

 Statement True False 

Producer surplus is smaller when the price is $245 than when it is $175 

Assuming each student receives a positive surplus, Janet will always receive less producer surplus than Larry. 

In order for Susan to earn a producer surplus of exactly $70 from selling a used textbook, the market price needs to be _______ 

Answer 1