A competitive firm's marginal cost of generating output q is denoted through MC(q) = 3 + 2q. Consider that the market price of the firm's product is $9. Determine the firm’s producer surplus?
Producer surplus is equivalent to the area below the market price, that means, $9.00, and above the marginal cost curve, that means 3 + 2q. Since MC is linear, producer surplus is a triangle with a base equivalent to $6 (9 - 3 = 6). The height of the triangle is 3, where P = MC. Thus, producer surplus is
(0.5)(6)(3) = $9.
