Suppose Jones sells a good for $100 at a yard sale. If the producer surplus from the sale is $75, Jones's cost of the good must have been:
A) $100.
B) $175.
C) $25.
D) equal to the deadweight loss.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price at which a good is sold and the seller's cost of producing that good. In this case, Jones's producer surplus is $75 and the price at which it was sold is $100. Therefore, Jones's cost of the good must have been $100 - $75 = $25.

Suppose Jones Sells a Good for $100 at a Yard