Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. Which of the following is TRUE regarding the economic surplus associated with her purchase of the boots?
A)Consumer surplus is $40, and producer surplus is $50.
B)Consumer surplus is $50, and producer surplus is $40.
C)Consumer surplus is $90, and producer surplus is $120.
D)Consumer surplus and producer surplus are the same.

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay, so $160 - $120 = $40. Producer surplus is the difference between the selling price and the marginal cost of production, so $120 - $70 = $50.

Bae Is Willing to Pay Up to $160 for a Particular