Alex tutors in his spare time for extra income. Students are willing to pay $48 per hour for as many hours Alex is willing to tutor. On a particular day, he is willing to tutor the first hour for $16, the second hour for $24.0, the third hour for $29.0, and the fourth hour for $48. Assume Alex is rational in deciding how many hours to tutor. His producer surplus is

Question

Quizplus · Accepted Answer

Producer surplus is the difference between what a producer is willing to accept for a good versus what they actually receive. Alex's willingness to accept for each hour is $16, $24, $29, and $48, respectively. Since students are willing to pay $48 per hour, Alex will tutor for all four hours, receiving $48 per hour. The producer surplus is calculated as follows: ($48 - $16) + ($48 - $24) + ($48 - $29) + ($48 - $48) = $32 + $24 + $19 + $0 = $75.

Alex Tutors in His Spare Time for Extra Income