When price equals marginal cost for the last unit sold, a seller will:
A)earn consumer surplus on every unit sold.
B)earn consumer surplus.
C)earn producer surplus on all except the last unit sold.
D)not earn any producer surplus overall.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive. When price equals marginal cost for the last unit sold, the producer earns producer surplus on all units except the last one, because for all previous units, the price received is higher than the marginal cost of production.

When Price Equals Marginal Cost for the Last Unit Sold