Skip to main content
Back

Producer Surplus and Willingness to Sell quiz #1

Control buttons has been changed to "navigation" mode.
1/16
  • How do you determine a product's producer surplus?
    Producer surplus is determined by calculating the difference between the market price and the minimum price each producer is willing to sell for, summed across all units sold. Graphically, it is the area above the supply curve and below the market price.
  • Why does producer surplus exist in a market?
    Producer surplus exists because some producers are willing to sell their goods for less than the market price, allowing them to earn extra profit above their minimum acceptable price.
  • What is the amount of producer surplus after the government imposes an excise tax on the market?
    After an excise tax is imposed, producer surplus decreases because the price received by producers falls, reducing the area above the supply curve and below the new, lower effective price.
  • Assume the market depicted in the graph is in equilibrium. What is producer surplus at this equilibrium?
    At equilibrium, producer surplus is the area above the supply curve and below the equilibrium market price, up to the equilibrium quantity.
  • What is the best definition of producer surplus?
    Producer surplus is the difference between the market price and the minimum price a producer is willing to accept, summed over all units sold.
  • What event would increase producer surplus?
    An increase in market price would increase producer surplus, as producers receive more above their minimum willingness to sell.
  • What is an example that illustrates the existence of producer surplus?
    A producer is willing to sell a product for \$10 but sells it for \$20, earning a surplus of \$10.
  • Producers often work to maximize their producer surplus and make it as large as possible.
    True. Producers aim to maximize their producer surplus by selling at higher prices relative to their minimum acceptable price.
  • Producer surplus is the difference between what two values?
    Producer surplus is the difference between the market price and the producer's minimum willingness to sell (marginal cost).
  • How do the deeds and actions of a producer relate to producer surplus?
    Producers' decisions to sell at market prices above their minimum willingness to sell generate producer surplus.
  • If demand is p = 50 - 2q and supply is p = 20 + 3q, what is the value of the producer surplus?
    First, find equilibrium: 50 - 2q = 20 + 3q → 5q = 30 → q = 6, p = 50 - 2(6) = 38. Producer surplus is the area above the supply curve and below price: Area = 0.5 × (38 - 20) × 6 = 0.5 × 18 × 6 = 54.
  • What two values must be compared to determine a product's producer surplus?
    You must compare the market price to each producer's minimum willingness to sell (marginal cost) for all units sold.
  • What is another name for producer surplus in microeconomics?
    Producer surplus is also known as surplus or the 'good deal' for producers, representing the difference between the market price and the minimum price a producer is willing to sell for.
  • How do you find producer surplus for an individual producer?
    Producer surplus for an individual producer is calculated as the market price minus the producer's minimum willingness to sell (or marginal cost).
  • How do you calculate total producer surplus in a market?
    Total producer surplus in a market is the area above the supply curve and below the market price, up to the quantity sold. In a graph, this is typically the area between the supply curve and the market price line.
  • Why does producer surplus exist in a market?
    Producer surplus exists because some producers are willing to sell at prices lower than the market price, so when they sell at the higher market price, they receive extra benefit above their minimum acceptable price.