A competitive industry consists of 100 firms. The short-run marginal cost curve for each firm is given by MC = 200 + .3Q. The demand curve faced by the industry is given as P = 400 - .1Q. What is the producer surplus for each firm?
What will be an ideal response?
(150 × 5)/2 = 375. The point here is that producer surplus can be made even if no economic profit is made. It is no coincidence that the producer surplus is equal to the fixed cost.
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