Questions tagged [producer-surplus]

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To what extent are renewables like solar driving down the cost of oil?

The price of oil has declined by roughly 66% in the past couple of years, and a lot of people want to know why: Some people are saying that the recent trend of oil prices dropping means the global ...
• 189
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Can a monopoly INCREASE the market surplus compared with a competitive market?

Monopolies are often blamed for DWLs(Dead Weight Losses), while competitive markets believed to work without DWLs (assuming zero taxes/subsidies and zero externalities). But I think I found an ...
• 1,135
114 views

Is there a class of demand functions that deliver equal surplus to consumers and a monopolist?

Consider a market with a monopolist firm that has zero marginal cost and faces demand $D(p;\mathbf{a})$, where $\mathbf{a}$ is a vector of parameters and $p$ is the price. The monopolist maximizes ...
• 16.9k
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Equilibrium price and quantity - consumer and producer surplus

Inverse function of market demand for certain good is equal to $P=100-0.25Q$, inverse supply function is $P=20+0.55Q$. Calculate equilibrium price and quantity. Furthermore calculate consumer and ...
• 327
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Change in Welfare from an Incentive based Supply Restriction

My question is related to the following graph: The supporting example is given with regard to a policy of an acreage limitation program to provide incentive for farmers to leave fields fallow. Why ...
231 views

Real life producer surplus

I'd like to ask a question about producer surplus. Basically I got the concept and how we calculate when a demand or price changes on a graph, but I cannot figure out how I should apply to real life. ...
• 123
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Calculating Consumer Surplus Given Table

Can someone help me? The answer is supposed to be 36 but I have no idea how they got that answer. Can someone explain why consumer surplus is 36 in this instance? Thanks! Refer to Table below. If the ...
310 views

Real world evidence that voluntary exchange is mutually beneficial?

The other day I was having a debate with a supporter of high taxes. I decided to argue against this by explaining the concept of the deadweight loss of taxation. In order to do so, I started with ...
• 23
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How do you show welfare changes with limited entry versus perfect competition?

In Perloff's intermediate microeconomics book, he explains that producer surplus will increase with policies that limit entry. I get this intuitively - if we limit competition, producers will earn ...
1 vote
686 views

Upward sloping demand curves can’t exist!

How can upward sloping demand curves exist given that consumer surplus will always be negative? So, why would a person ever buy a positive quantity?
• 71
1 vote
10k views

consumer and producer surplus

So, I am trying to evaluate the consumer and producer surplus. In my notes it is written that the new consumer surplus (defined by the change of the graph from pre-subsidy to post-subsidy) is G + A + ...
• 11
1 vote
7k views

What are the (immediate) effects of changing a good's price on consumer and producer surplus?

Basically, I'm trying to understand why the total surplus is maximized at the equilibrium and what happens if the price isn't at the equilibrium. Say the price of a good is the equilibrium price. ...
• 11
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Consumer Surplus [closed]

Is there a case where the consumer surplus being negative does not mean that the producer surplus increases? Is it true that as consumer surplus increases, producer surplus decreases and vice versa?
• 101
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What is the producer surplus given the price the consumer paid + price they are willing to pay, and the marginal cost of producing the product?

Linda is willing to pay $6 for a cereal box. Linda bought a cereal box for$4. The marginal cost of producing that cereal box ...
38 views

Perfectly Inelastic Supply curve and Producer margin [duplicate]

If the supply curve is perfectly inelastic then it is vertical as no matter what the price is supply will be same. Producer surplus is area below equilibrium price and above supply curve. so in case ...