Table 4-3

-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of The Waco Kid's cowboy hats is $40,
A)The Waco Kid will produce four hats.
B)producer surplus from the first hat is $40.
C)producer surplus will equal $28.
D)there will be a surplus; as a result, the price will fall to $24.

Question

Table 4-3
 
-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of The Waco Kid's cowboy hats is $40,
A)The Waco Kid will produce four hats. 
B)producer surplus from the first hat is $40. 
C)producer surplus will equal $28. 
D)there will be a surplus; as a result, the price will fall to $24.

Quizplus · Accepted Answer

Producer surplus is calculated as the difference between the market price and the marginal cost for each unit produced. If the market price is $40, the producer surplus for each hat is the difference between $40 and the marginal cost of that hat. Adding up the surplus for each hat produced gives a total producer surplus of $28.

Table 4-3 -Refer to Table 4-3.The Table Above Lists the Marginal Cost