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 cowboy hats is $50, producer surplus is
A)$0.
B)$4.
C)$62.
D)$138.

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 cowboy hats is $50, producer surplus is
A)$0. 
B)$4. 
C)$62. 
D)$138.

Quizplus · Accepted Answer

To find producer surplus, we need to first find the quantity at which the Waco Kid will produce cowboy hats. We can see from the table that the Waco Kid will produce up until the point where the marginal cost equals the market price. This occurs at a quantity of 6 cowboy hats. Therefore, the Waco Kid will produce 6 cowboy hats at a total cost of $162.
 
Producer surplus is then calculated by subtracting the total cost from the total revenue earned by the Waco Kid. At a market price of $50, the Waco Kid earns a total revenue of $300 (6 cowboy hats x $50 per cowboy hat). Therefore, the producer surplus is:
 
Producer Surplus = Total Revenue - Total Cost
Producer Surplus = $300 - $162
Producer Surplus = $138
 
Therefore, the answer is (C).

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