At Nick's Bakery,the cost to make homemade chocolate cake is $4 per cake.As a result of selling five cakes,Nick experiences a producer surplus in the amount of $17.50.Nick must be selling his cakes for
A)$6.50 each.
B)$7.50 each.
C)$9.50 each.
D)$10.50 each.

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the market price and the cost of production. In this case, we know that Nick's cost of production is $4 per cake, and that he experiences a total producer surplus of $17.50 for selling five cakes.

We can use this information to set up an equation:

Total Producer Surplus = (Market Price - Cost of Production) * Number of Cakes

$17.50 = (Market Price - $4) * 5

$17.50 = 5Market Price - $20

$37.50 = 5Market Price

Market Price = $7.50

Therefore, Nick must be selling his cakes for $7.50 each in order to experience a producer surplus of $17.50 after selling five cakes.

At Nick's Bakery,the Cost to Make Homemade Chocolate Cake Is