The annual Great Sofa Round-up is a collaborative event between Colorado State University and the City of Fort Collins aims to help students and neighbors get rid of unwanted furniture, while giving people in need access to inexpensive sofas. Suppose on the day of the Round-up, your friends take their couches to the main parking lot on campus where the Round-up is held. Raj will not sell his couch for less than $30, Emily will not sell her couch for less than $50, Nara will not sell her couch for less than $20, Sergio just wants to get rid of his couch and he is willing to give it away for free. At the Round-up, potential buyers think that all the couches available are basically the same and they are willing to buy a couch for $50. What is the value of the market producer surplus?
A) $100
B) $200
C) $120
D) $50

Question

Quizplus · Accepted Answer

The market producer surplus is the difference between the price that producers are willing to sell their goods for and the price that consumers are willing to pay for them. In this case, Raj is willing to sell his couch for $30, Emily is willing to sell her couch for $50, Nara is willing to sell her couch for $20, and Sergio is willing to give his couch away for free. The potential buyers are willing to buy a couch for $50. Therefore, the market producer surplus is $50 - $30 = $20 for Raj, $50 - $50 = $0 for Emily, $50 - $20 = $30 for Nara, and $50 - $0 = $50 for Sergio. The total market producer surplus is $20 + $0 + $30 + $50 = $100.

The Annual Great Sofa Round-Up Is a Collaborative Event Between