Lee can sell coffee at $1 per cup. The market equilibrium price of coffee is $2.50. Suppose Lee sells 200 cups of coffee. The producer surplus captured by Lee is $500.

Question

Quizplus · Accepted Answer

The producer surplus is calculated as the difference between the market price ($2.50) and the cost of production (which is not given in the question). If Lee is selling the coffee at $1 per cup and the market equilibrium price is $2.50, then Lee is likely experiencing a loss, rather than a surplus. Therefore, the statement that Lee captured a producer surplus of $500 is false.

Lee Can Sell Coffee at $1 Per Cup