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 price of cowboy hats decreases from $38 to $30,
A)consumer surplus will rise by $6.
B)the marginal cost of producing the third cowboy hat will fall to $30.
C)producer surplus will fall from $22 to $6.
D)producer surplus will rise from $8 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 price of cowboy hats decreases from $38 to $30,
A)consumer surplus will rise by $6. 
B)the marginal cost of producing the third cowboy hat will fall to $30. 
C)producer surplus will fall from $22 to $6. 
D)producer surplus will rise from $8 to $24.

Quizplus · Accepted Answer

When the price decreases from $38 to $30, the producer surplus decreases because the firm receives less revenue for each hat sold. The producer surplus falls from $22 to $6 as the price received is closer to the marginal cost of production.

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