Question

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5. Producer surplus for a group of sellers The following graph shows the supply curve for a group of sellers in the U.S. market for smartphones (orange line). Each seller has only one smartphone to sell. The market price of a smartphone is shown by the black horizontal line at $90. Each rectangle on the graph corresponds to a particular seller in this market: blue (circle symbols) for Darnell, green (triangle symbols) for Eleanor, purple (diamond symbols) for Jacques, tan (dash symbols) for Kyoko, and orange (square symbols) for Musashi. (Note: The name labels are to the right of the corresponding segment on the supply curve.) Use the rectangles to shade the areas representing producer surplus for each person who is willing to sell a smartphone at a market price of $90. (Note: If a person will not sell a smartphone at the market price, indicate this by leaving his or her rectangle in its original position on the palette.)

For fill in the blank: 1,2,3,4, or 5 sellers, and total producer surplus in this market will be  Blank.

For the last part fill in the blank: Decreases or increases to 1,2,3,4, or 5 Sellers  , and total producer surplus decreases or increases to Blank

Answer 1

Answer:

Producer surplus (PS) = Actual price received by seller (market price) - Minimum acceptable price

So, when price = $90, only Darnell, Eleanor and Jacques will buy the good since their minimum acceptable price is lower than market price.

Darnell Musashi Kyoko Market Price Eleanor PRICE (Dollars per smartphone) Jacques Jacques Eleanor Kyoko Darnell 0 + 1 7 8 Musashi 2 3 4 5 6 QUANTITY (Smartphones)

Three people will sell and total PS is $160.

Total CS ($) = (90 – 10) + (90 – 30) + (90- 70) = 80 + 60 + 20 = 160

Darnell Musashi Kyoko Eleanor PRICE (Dollars per smartphone) Jacques Jacques Market Price Eleanor Куоко Darnell 0 1 2 6 7 8 Musashi 3 4 5 QUANTITY (Smartphones)

When price decreases to $50 Darnell, Eleanor will sell the good since their minimum acceptable price is lower than market price.

When price decreases to $50, number of sellers decreases to 2 & total PS decreases to $60.

PS = (50 – 10) + (50 - 30) = 40 + 20 = 60