Pergunta

Suppose five construction companies have the ability to build a factory overseas to produce a manufactured good. The marginal cost of building a factory for each construction company is shown in the table below: Producer & Marginal Cost Company 1 & 1,000,000 Company 2 & 1,250,000 Company 3 & 1,300,000 Company 4 & 1,350,000 Company 5 & 1,500,000 If the market price of an overseas factory is 1,425,000 , what is the surplus for these five companies? Producer surplus is square . (Enter your response as a whole number.)
Solução

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Flávia MariaEspecialista · Tutor por 3 anos
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### Producer surplus is \( \$800,000 \).
Explicação
## Step 1: Identify the companies that will build the factory<br />### Companies will only build the factory if their marginal cost is less than or equal to the market price of \( \$1,425,000 \). From the table, we see that Company 1, Company 2, Company 3, and Company 4 have marginal costs below or equal to this price.<br /><br />## Step 2: Calculate the surplus for each company<br />### The producer surplus for each company is calculated as the difference between the market price and the marginal cost. We calculate it for each eligible company:<br />- For Company 1: Surplus = \( \$1,425,000 - \$1,000,000 = \$425,000 \)<br />- For Company 2: Surplus = \( \$1,425,000 - \$1,250,000 = \$175,000 \)<br />- For Company 3: Surplus = \( \$1,425,000 - \$1,300,000 = \$125,000 \)<br />- For Company 4: Surplus = \( \$1,425,000 - \$1,350,000 = \$75,000 \)<br /><br />## Step 3: Sum the surpluses<br />### Add the individual surpluses to get the total producer surplus:<br />\[<br />\$425,000 + \$175,000 + \$125,000 + \$75,000 = \$800,000<br />\]
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