Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

Question

Quizplus · Accepted Answer

Tom's producer surplus is the difference between what he is paid and his willingness to accept. He tunes three pianos because the fourth piano's cost ($160) exceeds the payment ($155). His surplus is ($155-$120) + ($155-$125) + ($155-$140) = $35 + $30 + $15 = $80.

Tom Tunes Pianos in His Spare Time for Extra Income