Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and will have producer surplus equal to _____.

Question

Quizplus · Accepted Answer

Mountain River Adventures will offer three trips per day because the cost of the third trip ($140) is less than the market price ($150), but the cost of the fourth trip ($160) exceeds the market price. The producer surplus is calculated as the difference between the market price and the cost for each trip: ($150-$100) + ($150-$120) + ($150-$140) = $50 + $30 + $10 = $90.

Mountain River Adventures Offers Whitewater Rafting Trips Down the Colorado