1 answer

5. Suppose the demand for ice cream sundaes can be represented by the equation Qp- 10-P,...

Question:

5. Suppose the demand for ice cream sundaes can be represented by the equation Qp- 10-P, and the supply is given by the equat
5. Suppose the demand for ice cream sundaes can be represented by the equation Qp- 10-P, and the supply is given by the equation Qs = P. Which of the following is the best estimate of the producer surplus in this market? a. $5 b. $10 c. $12.5 d. $22.5

Answers

ANswer
the market is in equilibrium at Qd=Qs
equating both
10-P=P
2P=10
P=5
Q=10-P=10-5=5
---
producer surplus is the area above supply curve and below price and left of the quantity.
PS=0.5*5*5
=$12.5
the Producer surplus is $12.5
option c


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