Table 4-6

-Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $18,
A) Marko's will produce four shirts.
B) producer surplus from the first shirt is $18.
C) producer surplus will equal $22.
D) there will be a surplus; as a result, the price will fall to $7.

Question

Table 4-6
 
-Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $18,
A) Marko's will produce four shirts. 
B) producer surplus from the first shirt is $18. 
C) producer surplus will equal $22. 
D) there will be a surplus; as a result, the price will fall to $7.

Quizplus · Accepted Answer

Producer surplus is calculated as the difference between the market price and the marginal cost for each unit produced. If the market price is $18, the producer surplus for each shirt is the market price minus the marginal cost. Adding up the producer surplus for each shirt produced until the marginal cost equals the market price will give the total producer surplus.

Table 4-6 -Refer to Table 4-6. the Table Above Lists the Marginal