If a seller enjoys a producer surplus of $30 when she sells a good for $79,her reservation value for the good is ________.
A) $30
B) $49
C) $79
D) $109

Question

Quizplus · Accepted Answer

Producer surplus is calculated by subtracting the cost of production from the price of the good. In this case, the seller is enjoying a producer surplus of $30 when selling the good for $79. Therefore, her cost of production for the good must be $49 ($79 - $30). This means that her reservation value for the good (the maximum price she would be willing to pay for it) is also $49.

If a Seller Enjoys a Producer Surplus of $30 When