Rodney sells gluten-free cupcakes at the Farmer's Market. His marginal cost for making another cupcake is $1, and he can sell his cupcakes for $3. Rodney's producer surplus from each sold cupcake is equal to:

Question

Quizplus · Accepted Answer

Producer surplus is the difference between what a producer is willing to accept for a good versus what they actually receive. Rodney is willing to accept $1 (marginal cost) but receives $3, so his producer surplus per cupcake is $3 - $1 = $2.

Rodney Sells Gluten-Free Cupcakes at the Farmer's Market