Mike and Sarah sell lemonade on the corner for $2.10 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $40. How many cups did Mike and Sarah sell?
A)10
B)40
C)2
D)20

Question

Quizplus · Accepted Answer

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive. Here, Mike and Sarah are willing to accept $0.10 per cup but actually receive $2.10 per cup. The surplus per cup is $2.10 - $0.10 = $2.00. With a total surplus of $40, they sold $40 / $2.00 = 20 cups.

Mike and Sarah Sell Lemonade on the Corner for $2