MC Qu. 20 Use the table below to answer...

Use the table below to answer the following question.

Units Market Price Minimum Acceptable Price
1 $10 $2
2 10 4
3 10 6
4 10 8
5 10 10
6 10 14

What is the value of producer surplus in the table above?

Question

MC Qu. 20 Use the table below to answer...

Use the table below to answer the following question.

Units	Market Price	Minimum Acceptable Price
1	$10	$2
2	10	4
3	10	6
4	10	8
5	10	10
6	10	14

What is the value of producer surplus in the table above?

BlackTom AI · Accepted Answer

We start by restating the problem to ensure clarity: we have a table with units, a constant market price, and a minimum acceptable price (MAP) for each unit. The question asks for the value of producer surplus in this table.

Option 1: $20. To evaluate producer surplus, per unit it is often calculated as price minus the minimum acceptable price, but not below zero (since negative surplus isn’t realized). For each unit:
- Unit 1: 10 − 2 = 8
- Unit 2: 10 − 4 = 6
- Unit 3: 10 − 6 = 4
- Unit 4: 10 − 8 = 2
- Unit 5: 10 − 10 = 0
- Unit 6: 10 − 14 = −4, which is treated as 0 in total surplus calculation
Summing the positive differences gives 8 + 6 + 4 + 2 + 0 + 0 = 20. This aligns with the idea that producer surplus accumulates from each unit produced where the price exceeds the seller’s minimum acceptable price.

Option 2: $12. If one were to arrive at 12, they might incorrectly include unit 6 or miscalculate the per-unit surplus. However, unit 6 actually yields a negative surplus (10 − 14), so it does not contribute to total producer surplus. Any attempt to reach 12 would require miscounting or double-counting units, which is inconsistent with the per-unit surplus method.

Option 3: $6. This figure could result from counting only a subset of units, perhaps stopping after the first two or misapplying the zero-surplus rule. If you sum the accurate per-unit surpluses for the first four units (8 + 6 + 4 + 2), you get 20, not 6. Limiting to a smaller portion ignores the remaining profitable units.

Option 4: $54. A value this large would imply summing all positive and negative margins or misapplying the concept. Since the last unit has a negative margin (price below MAP), it should not add positively to producer surplus. Moreover, the correct total among the positive per-unit surpluses is 20, not 54.

In summary, the correct approach is to compute, for each unit, the difference between the market price and the MAP, count only positive differences, and sum them across all units. Doing so yields 8 + 6 + 4 + 2 + 0 + 0 = 20, which eliminates negative contributions and aligns with the standard producer surplus calculation.

MC Qu. 20 Use the table below to answer... Use the table below to answer the following question. Units Market Price Minimum Acceptable Price 1 $10 $2 2 10 4 3 10 6 4 10 8 5 10 10 6 10 14 What is the value of producer surplus in the table above?

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