Practice prompt · Q:economics-and-market-foundations/compute-producer-surplus-001

Compute producer surplus without calling it profit

Compute a linear seller area and distinguish it from net income, cash, unsold output, fixed cost, and universal seller benefit.

Updated Aug 7, 2026 Review due Nov 7, 2026

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Linden's inverse supply intercept is negative $20, equilibrium price is $60, and 800 chairs trade in the baseline model. Which result is correct?

Choose the best answer. a $32,000 per modeled week, computed as one-half times the $80 price-over-reservation height times 800 traded chairs; it is not net income or cash. b $48,000 of net income because equilibrium revenue has no related costs. c $64,000 because producer surplus includes the consumer area as seller profit.

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Answer: a

Choice a. Producer surplus is 1/2 × ($60 - (-$20)) × 800 = $32,000 per modeled week under the supplied cost interpretation.