Answer:
Explanation:
Last year the equilibrium price and the quantity of good X were $10 and 5 million pounds, respectively.
The producer surplus is the difference between the minimum price that a producer is willing to accept and the price it actually gets. It can be found by calculating the area between the supply curve and the market price.
The producer surplus
= [tex]\frac{1}{2}\ \times\ base\ \times\ height[/tex]
= [tex]\frac{1}{2}\ \times\ quantity\ \times\ price[/tex]
= [tex]\frac{1}{2}\ \times\ 5\ \times\ 10[/tex]
= $25
Because of strong demand this year, the equilibrium price and the quantity of good X are $12 and 7 million pounds, respectively.
The producer surplus
= [tex]\frac{1}{2}\ \times\ base\ \times\ height[/tex]
= [tex]\frac{1}{2}\ \times\ quantity\ \times\ price[/tex]
= [tex]\frac{1}{2}\ \times\ 7\ \times\ 12[/tex]
= $42
