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Table 10.7
-(Table 10.7) Assume that the marginal cost of coffee is $0.50 and the marginal cost of cake is $0.50. Which pricing scheme leads to the highest producer surplus?
A) $3.25 for coffee and cake
B) $1.50 for cake and $2.00 for coffee
C) $3.75 for both coffee and cake or $2.50 for cake and $2.50 for coffee
D) $5.00 for both coffee and cake or $2.75 for cake and $2.75 for coffee

Question

Use the following to answer question:
Table 10.7 
-(Table 10.7) Assume that the marginal cost of coffee is $0.50 and the marginal cost of cake is $0.50. Which pricing scheme leads to the highest producer surplus?
A) $3.25 for coffee and cake 
B) $1.50 for cake and $2.00 for coffee 
C) $3.75 for both coffee and cake or $2.50 for cake and $2.50 for coffee 
D) $5.00 for both coffee and cake or $2.75 for cake and $2.75 for coffee

Quizplus · Accepted Answer

The pricing scheme in option C maximizes producer surplus by setting prices above marginal cost while still being competitive, allowing for higher revenue without deterring too many customers.

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