Table 5.3
-Refer to Table 5.3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specialises in producing fancy dress costumes.If the market price of cowboy hats is $50, producer surplus is

Question

Table 5.3 
-Refer to Table 5.3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specialises in producing fancy dress costumes.If the market price of cowboy hats is $50, producer surplus is

Quizplus · Accepted Answer

To calculate the producer surplus, we need to find the area between the market price and the supply curve above it. In this case, the marginal cost curve acts as the supply curve. Thus, at a price of $50, the firm is willing to supply 500 cowboy hats (as shown by the marginal cost of $50).

The total cost of producing these hats would be $5,000 ($10 per hat x 500 hats). Therefore, at a price of $50, the firm would make a profit of $2,500 ($50 per hat x 500 hats) and a producer surplus of $2,438 (($62 - $10) per hat x 500 hats). Hence, the best choice is C.

Table 5.3 -Refer to Table 5.3.The Table Above Lists the Marginal Cost