The marginal cost for Morgan's Marvellous Movies is given in the following table: Table 5.2.3
$$\begin{array} { c c }
\hline\begin{array} { c }
\text { Quantity } \
\text { (number of movies) }
\end{array} & \begin{array} { c }
\text { Marginal cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 4.00 \
2 & 4.50 \
3 & 5.00 \
4 & 5.50 \
5 & 6.00 \
\hline
\end{array}$$ If the firm sells the first movie at a price of $7,what is the producer surplus on that movie?

Question

The marginal cost for Morgan's Marvellous Movies is given in the following table: Table 5.2.3
$$\begin{array} { c c } 
\hline\begin{array} { c } 
\text { Quantity } \
\text { (number of movies) }
\end{array} & \begin{array} { c } 
\text { Marginal cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 4.00 \
2 & 4.50 \
3 & 5.00 \
4 & 5.50 \
5 & 6.00 \
\hline
\end{array}$$ If the firm sells the first movie at a price of $7,what is the producer surplus on that movie?

Quizplus · Accepted Answer

The producer surplus is the difference between the price and the marginal cost. In this case, the price is $7 and the marginal cost is $4.00, so the producer surplus is $7 - $4.00 = $3.

The Marginal Cost for Morgan's Marvellous Movies Is Given in the Following