Question

The following graph shows the supply curve for a group of sellers in the U.S. market for tablets (orange line). Each seller has only one tablet to sell. The market price of a tablet is shown by the black horizontal line at $175.

Answer 1

Graph showing supply curve for a group of sellers:

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Total producer surplus = (175-25) x 1 + (175-75) x 1 + (175-125) x 1 = $300

Based on the information on the previous graph, you can tell that Carlos, Deborah, and Felix will sell tablets at the given market price, and total producer surplus in this market is $300.

Market price of a tablet increases to $275:

Total producer surplus = (275-25) x 1 + (275-75) x 1 + (275-125) x 1 + (275-225) = $650.

Based on the information in the second graph, when the market price of a tablet increases to $275, the number of sellers willing to sell a tablet increases to 4, and total producer surplus increases to $650.

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