Question:

Calculating producer surplus ?

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If the price is 8.5, what is the producer surplus? Please also explain why you used the numbers you use

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  1. Surplus is area above supply curve and below price line, thus producer surplus in your case is sum of:

    (8.5-3)x1=5.5 (surplus from first sold unit)

    (8.5-6)x1=2.5 (surplus from second sold unit)

    Total producer surplus = 5.5+2.5 = 8

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