The price of a shirt is $20.Charlie can produce a shirt at a marginal cost of $10,Mac can produce a shirt for $18,and Dennis can produce a shirt for $22.For a shirt,Deandra has a marginal benefit of $25,Frank has marginal benefit of $20,and Artemis has a marginal benefit of $18.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Deandra's consumer surplus is $5 ($25 - $20), Frank's is $0 ($20 - $20), and Artemis does not buy a shirt because her marginal benefit is below the price. Thus, the total consumer surplus is $5. Producer surplus is the difference between the price and the marginal cost of production. Charlie's producer surplus is $10 ($20 - $10), Mac's is $2 ($20 - $18), and Dennis does not produce a shirt because his cost is above the price. The total producer surplus is $12 ($10 + $2).

The Price of a Shirt Is $20