Question

Calculate Producer Surplus if Reservation Price=20, Price=8, & Quantity=10.

Answer 1

C. 60  
Explanation: 
Producer's Surplus means the value producer derives from selling goods. For example, if producer is willing to sell the product for a price 8 but consumers are willing to pay a higher price, let's say 20, then producer achieves a surplus of 12 per unit. Let's calculate the producer's surplus -   
As per question, Reservation Price (RP) =20, Price (P) =8, & Quantity (Q) =10  
The formula for Producer Surplus (PS) is as follow: 
 PS = 1/2 (RP - P) x Q 
= 1/2 (20-8) x 10 = 60