# Producer Surplus

Announcements
#1
Toy Story (TS) sells toys for children around the world. The firrm faces a demand curve of
Q = 10 - 0.4P, where Q is the quantity of toys and P is price of a toy. TS has a marginal
cost curve that is equal to MC = 5Q.

(c) Define the consumer surplus and producer surplus. Derive the social welfare if TS
chooses profit maximising quantity and price. (2 marks)

In part a, I calculated the profit maximising quantities to be P=18.75 and Q=2.5. I think I have worked out consumer surplus to be (25-18.75)(2.5)/2 = 7.8125. Please can someone confirm that is correct?

I am having a few problems with calculating the producer surplus. I am not sure whether I need to derive a supply curve (and would this just be P=5Q?) or if this isn't necessary as we're calculating it from a specific price/quantity. Please can someone help?
0
#2
0
7 years ago
#3
0
X

new posts
Back
to top
Latest

### Oops, nobody has postedin the last few hours.

Why not re-start the conversation?

see more

### Poll

Join the discussion

#### How confident are you that you'll achieve the grades you need to get into your firm uni?

I think I've exceeded the grades for my university offer (29)
17.68%
I think I've met the grades for my university offer (41)
25%
I think I've missed the grades for my university offer (85)
51.83%
Something else (tell us in the thread) (9)
5.49%