Question

ohn has been working as a tutor for $300 a semester. When the university raises the price it pays tutors to $400, Jasmine enters the market and begins tutoring as well. How much does producer surplus rise as a result of this price increase

Answer 1

Answer:

between $100 and $200

Explanation:

Producer surplus: It is the difference in the amount that a seller or producer is paid in the market for selling its product in the market and cost of producing its product. Producer surplus is shown on the graph above supply curve and below market price. An increase in demand of product can increase the price of product, which also increase the producer surplus.

In the given case, John is a tutor, who can earn surplus by the amount of difference that people is willing to pay him for tutoring and minimum amount that he is going to accept.