Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is:
A) $1.13.
B) $7.
C) $53.
D) $113.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price at which a good is sold and the minimum price at which producers are willing to sell it.

Here, Nigeria is receiving $53 of producer surplus from each barrel of oil sold at $60. Therefore, the minimum price at which Nigeria is willing to sell a barrel of oil is $60 - $53 = $7.

Hence, Nigeria's cost to produce a barrel of oil is $7. Hence, the best choice is B.

Nigeria Receives $53 of Producer Surplus from Each Barrel of Oil