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The supply function of a commodity is P = x3+2x+18x^3+2x+18. When 4 units of commodity are sold , then producer surplus is:

Solution

✅ Correct Option: 4

Given supply function: P=x3+2x+18P = x^3 + 2x + 18

When x=4x = 4:

P=(4)3+2(4)+18P = (4)^3 + 2(4) + 18

P=64+8+18P = 64 + 8 + 18

P=90P = 90

This is the market price at which 4 units are sold.


Total Revenue =P×Q= P \times Q

=90×4= 90 \times 4

=360= 360

This is the total money producers receive from selling 4 units.


Area under supply curve represents the minimum amount producers would have accepted:

∫04(x3+2x+18) dx=[x44+x2+18x]04\int_0^4 (x^3 + 2x + 18) \, dx = \left[\frac{x^4}{4} + x^2 + 18x\right]_0^4

=444+42+18(4)−0= \frac{4^4}{4} + 4^2 + 18(4) - 0

=2564+16+72= \frac{256}{4} + 16 + 72

=64+16+72= 64 + 16 + 72

=152= 152


Producer Surplus == Total Revenue −- Area under supply curve

=360−152= 360 - 152

=208= 208

Producer surplus is the extra benefit producers get - they were willing to accept 152152 but received 360360.

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