Question 1

Producer surplus equals total revenues minus total costs.

Accepted Answer

Producer surplus is the difference between the market price and the cost of production for each unit sold. It is not simply the difference between total revenues and total costs.

Question 2

Exhibit 6-9 
-Refer to Exhibit 6-9. Calculate the producer surplus.

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The answer of Exhibit 6-9 
-Refer to Exhibit 6-9. Calculate...

Question 3

Explain the difference between profit and producer surplus.

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The answer of Explain the difference between profit and producer...

Question 4

The table below shows the cost schedule for Walworth Baker.

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The answer of The table below shows the cost schedule...

Question 5

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

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Question 6

Compute the total revenue, total costs, and profits when the price of a crate of grapes is $80. How many crates of grapes will maximize profits? How does the answer compare to the price equals marginal cost condition?

Accepted Answer

The answer of Compute the total revenue, total costs, and...

Question 7

Suppose you are able to babysit at $10 per hour. The only cost to you is the opportunity cost of your time. For the first 2 hours, the opportunity cost of your time is $7 per hour. But after 2 hours, the opportunity cost of your time rises to $13 because of other commitments. Draw the marginal cost to you of babysitting. Draw in the price you receive for babysitting. For how long will you babysit? Calculate your producer surplus.

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Question 8

The difference between producer surplus and profits for a single firm is fixed costs.

Accepted Answer

Producer surplus is the difference between the price received by a producer and the minimum price at which the producer is willing to sell a product, which does not take fixed costs into account. Profits, on the other hand, are the revenue earned by a firm after deducting all costs, including fixed costs. Therefore, fixed costs are the difference between producer surplus and profits for a single firm.

Question 9

Suppose a price-taking firm has the following total cost schedule:

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The answer of Suppose a price-taking firm has the following...

Question 10

Profit is usually ____ producer surplus for a firm.
A) less than
B) double
C) greater than
D) half of
E) the same as

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The answer of Profit is usually ____ producer surplus for...

Question 11

The table below shows the total costs of producing cherries on a small plot of land.

Accepted Answer

The answer of The table below shows the total costs...

Question 12

An increase in market demand has no effect on producer surplus because producer surplus is related to supply.

Accepted Answer

Producer surplus is the difference between the price at which a producer is willing to sell a unit of a good and the price they actually receive for that unit. As demand increases, producers are able to charge higher prices and as a result, their producer surplus will increase. Therefore, an increase in market demand will have an effect on producer surplus.

Question 13

Suppose a firm's supply curve can be expressed as -4 + 2P. Calculate the firm's producer surplus when price is $25.

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The answer of Suppose a firm's supply curve can be...

Question 14

Producer surplus is just an economist's technical name for profit.

Accepted Answer

Producer surplus is not the same as profit. Producer surplus is the difference between the price at which a producer is willing and able to sell a good or service and the actual price they receive. Profit, on the other hand, is the total revenue a producer receives from selling a good or service minus the total costs of producing that good or service.

Question 15

Which of the following formulas is not a valid characterization of producer surplus? A) Total revenue - the sum of marginal costs B) Profit + fixed costs C) Profit -marginal costs D) Total revenue -(total costs - fixed costs) E) (P - MC₁) + (P -MC₂) + (P - MC₃) + J + (P -MC_Q), where Q = quantity produced and sold

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The answer of Which of the following formulas is not...

Question 16

Where does producer surplus get its name? That is, why do economists call it a surplus?

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The answer of Where does producer surplus get its name?...

Question 17

Producer surplus equals profits
A) plus the sum of marginal costs.
B) minus the sum of marginal costs.
C) plus total fixed costs.
D) minus total fixed costs.
E) minus total costs.

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The answer of Producer surplus equals profits
A) plus the sum...

Question 18

The difference between producer surplus and economic profit is
A) marginal cost.
B) average fixed cost.
C) variable costs.
D) fixed costs.
E) total costs.

Accepted Answer

Producer surplus is the difference between the price received by the producer and the marginal cost of production, while economic profit is the total revenue minus both explicit and implicit costs, which include fixed costs. Therefore, the difference between the two concepts is fixed costs (choice D). The other choices are not directly related to the difference between producer surplus and economic profit.

Question 19

Name one industry in which firms are price-takers. Name one industry in which firms are not price-takers. Suppose you set up a business where you sell lemonade on a street. Would you be a price-taker or a price-maker?

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The answer of Name one industry in which firms are...

Question 20

What are the two primary inputs in today's production? Which one of these inputs is variable and which one is fixed?

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Quiz 6: The Supply Curve and the Behavior of Firms