Hester owns an ice cream shop. It costs her $2 per cone to make 10 ice cream cones. If she sells 10 cones for $4 each, her producer surplus on the 10 cones is equal to
A) $40.
B) $10.
C) $4.
D) $2.
E) $20.

Question

Quizplus · Accepted Answer

Hester's cost to make 10 cones is $2 per cone, which is a total of $20 for all 10 cones. If she sells the 10 cones for $4 each, she will make a total revenue of $40. Her producer surplus is the difference between her revenue and her cost, so it is $40 - $20 = $20. Therefore, the best choice is E.

Hester Owns an Ice Cream Shop