Answer $570.Please explain how to get this answer and show the wo.pdf
- 1. Answer: $570. Please explain how to get this answer and show the work process. Thank you Solution - As you can see in the above picture I have labeled some points which will be required in the solution. - The producer surplus is the area occupied by the triangle POE before the prices were rise. And, the new producer surplus is the occupied by the triangle OP1E1. We need to find the monetary value of these areas to find out the producer surplus. - Firstly, we will calculate total revenue, before the rise of prices, which is covered by the quadrilateral PEQO. Total revenue = Quantity x Price = 80 x 16 = $1,280. Now if we take a look at the given figure, we will notice that the triangle POE, which is producer surplus, is exactly half of the Quadrilateral PEQO, which is Total Revenue. This implies that producer surplus is half of total revenue. Thus, producer surplus before change in the prices = 1,280 / 2 = $640 - Secondly, now we will calculate total revenue, after the rise of prices, which is covered by the quadrilateral P1E1Q1O. Total revenue = Quantity x Price = 110 x 22 = $2,420. Now, here again the triangle P1OE1, which is producer surplus, is exactly half of the Quadrilateral P1E1Q1O, which is Total Revenue. Thus, same as previous, the producer surplus is half of the total revenue. Thus, producer surplus after change in the prices = 2,420 / 2 = $1,210. - Increase in producer surplus = 1,210 - 640 = $570