The table below shows the marginal costs of the last croissant produced by four different bakeries. Assume that any bakery willing to sell croissants at the market price sells 100 croissants and that all bakeries have the same costs.
\begin{tabular}{ll}
Bakery & Marginal cost \
\hline A & $\$ 2.25$ \
B & $\$ 2.75$ \
C & $\$ 3.00$ \
D & $\$ 3.25$
\end{tabular}

How much producer surplus is earned in this market at a price of $\$ 3.00$ ?
Choose 1 answer:
(A) $\$ 100$
(B) $\$ 75$
(c) $\$ 1$

Question

The table below shows the marginal costs of the last croissant produced by four different bakeries. Assume that any bakery willing to sell croissants at the market price sells 100 croissants and that all bakeries have the same costs.
\begin{tabular}{ll} 
Bakery & Marginal cost \
\hline A & $\$ 2.25$ \
B & $\$ 2.75$ \
C & $\$ 3.00$ \
D & $\$ 3.25$
\end{tabular}

How much producer surplus is earned in this market at a price of $\$ 3.00$ ?
Choose 1 answer:
(A) $\$ 100$
(B) $\$ 75$
(c) $\$ 1$

Accepted Answer

∻Solution∻ ‖ a ⋮ Producer Surplus Definition: Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive. ‖ ‖ b ⋮ Calculating Producer Surplus: At a price of $3.00, only bakeries A and B would earn a producer surplus since bakery C's marginal cost is $3.00 and bakery D's marginal cost is above the market price. ‖ ‖ c ⋮ Surplus for Bakery A: For bakery A, the surplus per croissant is $3.00 - $2.25 = $0.75. Since they sell 100 croissants, the total surplus for A is $0.75 * 100 = $75. ‖ ‖ d ⋮ Surplus for Bakery B: For bakery B, the surplus per croissant is $3.00 - $2.75 = $0.25. Since they sell 100 croissants, the total surplus for B is $0.25 * 100 = $25. ‖ ‖ e ⋮ Total Producer Surplus: The total producer surplus in the market at a price of $3.00 is the sum of the surpluses for bakeries A and B, which is $75 + $25 = $100. ‖ ∻Answer∻ ⚹ (A) $100 ⚹ ∻Key Concept∻ ⚹ Producer Surplus in a Market ⚹ ∻Explanation∻ ⚹ Producer surplus is calculated by summing up the individual surpluses of all producers who can sell at a price above their marginal cost. In this case, bakeries A and B have a combined surplus of $100 at the price of $3.00. ⚹◊How does the price of $3.00 impact producer surplus in this market?⍭ Generate me a similar question◊

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