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 price of cowboy hats increases from $38 to $46,

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 price of cowboy hats increases from $38 to $46,

Quizplus · Accepted Answer

Producer surplus increases when the price of the product increases because producer surplus is the difference between what producers are willing to accept for a product (as indicated by marginal cost) and what they actually receive (the market price). In this case, as the price increases from $38 to $46, the area representing producer surplus on a supply and demand graph would increase, reflecting the higher price received over the marginal cost for each unit sold up to the quantity where the marginal cost equals the new price. The specific numbers ($22 to $46) in option C might not directly correspond to calculated values but indicate the concept of increasing producer surplus with rising prices.

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